city of bay city, michigan · 2007. 12. 29. · city of bay city, michigan comprehensive annual...

CITY OF BAY CITY, MICHIGANCOMPREHENSIVE ANNUAL FINANCIAL REPORT

June 30, 2007

LIST OF PRINCIPAL OFFICIALS

MAYORMichael J. Buda

CITY COMMISSIONERS

1st Ward: Christopher J. Shannon 5th Ward: M.J. Gorney

2nd Ward: Michael E. Wooley 6th Ward: John F. Davidson

3rd Ward: Wendy A. Legner 7th Ward: Marie T. Kurzer

4th Ward: James F. Flannery 8th Ward: Kathleen L. Newsham

9th Ward: Charles M. Brunner

ADMINISTRATION

CITY MANAGER

Robert V. Belleman

DEPUTY CITY MANAGER DEPUTY CITY MANAGEROF ADMINISTRATIVE OF COMMUNITY

SERVICES/CITY CLERK DEVELOPMENTDana L. Muscott Steven G. Black

WATER TREATMENT WASTEWATER TREATMENT SUPERINTENDENT SUPERINTENDENT

John DeKam William Kaiser

ACTING ELECTRIC POLICE FIREDIRECTOR CHIEF CHIEFPhil Newton Michael Cecchini Doug Doefer

Prepared By:Cathy Szostak,Chief Accountant

CITY OF BAY CITY, MICHIGAN COMPREHENSIVE ANNUAL FINANCIAL REPORT

TABLE OF CONTENTS FOR FISCAL YEAR ENDED JUNE 30, 2007

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Introductory Section Title Page/List of Principal Officials i Table of Contents ii-v Letter of Transmittal vi-xii Organizational Chart xiii Government Finance Officers Association:

Certificate of Achievement for Excellence in Financial Reporting xiv

Independent Auditor’s Report 1-2 Management’s Discussion and Analysis 3-11 Basic Financial Statements: Government-Wide Financial Statements:

Statement of Net Assets 12 Statement of Activities 13-14

Fund Financial Statements: Governmental Funds:

Balance Sheet 15 Reconciliation of the Governmental Funds Balance

Sheet to the Statement of Net Assets 16 Statement of Revenues, Expenditures, and

Changes in Fund Balances 17 Reconciliation of the Statement of Revenues,

Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 18

Budgetary Comparison Schedules – General Fund 19-20 Major Streets Fund 21

Rehabilitation Fund 22 Proprietary Funds:

Statement of Net Assets 23 Reconciliation of the Enterprise Funds Statement

of Net Assets to the Business-type Activities in the Statement of Net Assets 24

Statement of Revenues, Expenses, and Changes in Net Assets 25

Reconciliation of the Enterprise Funds Statement of Revenues, Expenses and Changes in Net Assets to the Business-type Activities in the Statement of Activities 26

Combining Statement of Cash Flows 27



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Basic Financial Statements (continued): Fiduciary Funds:

Statement of Net Assets 28 Statement of Changes in Plan Net Assets –

Pension and Other Employee Benefit Trust Funds 29

Component Units:

Combining Statement of Net Assets 30 Combining Statement of Activities 31-32

Notes to Financial Statements 33-61 Required Supplemental Information: Pension System Schedules of Funding Progress and

Employer Contributions 62 Other Supplemental Information: Nonmajor Governmental Funds: Combining Balance Sheet 63 Combining Statement of Revenues, Expenditures,

and Changes in Fund Balances 64 Budgetary Comparison Schedules –

Local Streets Fund 65 Fire Awareness Fund 66 Community Policing Fund 67 Parking Enforcement Fund 68 Solid Waste Management Fund 69 Community Development Block Grant Fund 70 Public Improvement Fund 71 Building Inspection Fund 72 Neighborhood Opportunity Fund 73 Bond Sinking Fund 74 Nonmajor Enterprise Funds:

Combining Statement of Net Assets 75 Combining Statement of Revenues, Expenses

and Changes in Net Assets 76 Combining Statement of Cash Flows 77



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Other Supplemental Information (continued): Internal Service Funds:

Combining Statement of Net Assets 78 Combining Statement of Revenues, Expenses,

and Changes in Net Assets 79 Combining Statement of Cash Flows 80

Fiduciary Funds: Statement of Plan Net Assets 81 Combining Statement of Changes in Plan Net Assets 82

Combining Statement of Fiduciary Assets and Liabilities – Agency Funds 83

Combining Statement of Changes in Assets and Liabilities 84

Component Units:

Downtown Development Authority, Midland Street TIFA, Marquette District TIFA, Water Street DDA: Statement of Net Assets and Governmental Fund Balance Sheet 85

Marina Development TIFA, Allen Healthcare DDA, Knepp’s DDA: Statement of Net Assets and Governmental Fund Balance Sheet 86

Downtown Development Authority, Midland Street TIFA, Marquette District TIFA, Water Street DDA: Statement of Activities and Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances 87

Marina Development TIFA, Allen Healthcare DDA, Knepp’s DDA: Statement of Activities and Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances 88

Statistical Section: Net Assets by Component – Last Five Fiscal Years 89 Changes in Net Assets – Last Five Fiscal Years 90 Fund Balance Governmental Funds – Last Five Fiscal Years 91 Changes in Fund Balances – Governmental Funds – Last Five Fiscal Years 92



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Statistical Section (continued): Tax Revenues by Source – Last Ten Fiscal Years 93 Assessed Value and Estimated Actual Value of Taxable Property – Last Ten Fiscal Years 94 Property Tax Rates: Direct and Overlapping Governments – Last Ten Fiscal Years 95 Principal Property Taxpayers and Electric Customers 96 Property Tax Levies and Collections – Last Ten Fiscal Years 97 Ratios of Outstanding Debt by Type – Last Ten Fiscal Years 98 Ratios of General Bonded Debt Outstanding - Last Ten Fiscal Years 99 Direct and Overlapping Governmental Activities Debt as of June 30, 2007 100 Legal Debt Margin Information – Last Ten Fiscal Years 101 Pledged Revenue Coverage – Last Ten Fiscal Years 102 Demographic and Economic Statistics – Last Ten Fiscal Years 103 Principal Employers 2007 and 1998 104 Full-Time Equivalent Bay City Employees by Function – Last Ten Fiscal Years 105 Operating Indicators by Function – Last Ten Fiscal Years 106 Capital Assets Statistics by Function – Last Ten Fiscal Years 107 Single Audit 108-115

City of Bay City Organizational Chart

City Manager

Community Development

Planning

Engineering

Streets/Sanitation/ Fleet/Bridges/Traffic

Redevelopment

Economic Development

Parks

City Commission

Administrative Services

City Clerk

Information Systems

City Hall Maintenance

Fiscal Services

Electric

Police

Human Resources

Accounting

Purchasing

Treasurer

Assessor

Accounts Receivable

Payroll

Metering (Records &

File)

Plant Operations

Sewer Maintenance

Plant Operations

Water Distribution

Water Treatment

Generation Plant

Electric Operations

Building CodeEnforcement

Electorate

Support Operations

Patrol Operations

Fire

Wastewater

FINANCIAL SECTIONThis section is composed of the following:

Independent Auditors' Report

Management's Discussion and Analysis

Basic Financial Statements

Notes to Basic Financial Statements

Supplementary Financial Information

An Independent Member of Baker Tilly International

5800 Gratiot • Suite 201 • P.O. Box 2025 • Saginaw, MI 48605 • 989.799.9580 • Fax 989.799.0227 • www.rehmann.com

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INDEPENDENT AUDITORS’ REPORT

December 27, 2007 To the Honorable Mayor and City Commission City of Bay City, Michigan We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Bay City, Michigan, as of and for the year ended June 30, 2007, which collectively comprise the City’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Bay City Michigan’s management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of Wenonah Park Properties, Inc. Component Unit, which represents 69.85% of the assets and 77.52% of the revenues of the aggregate discretely presented component units. Those financial statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Wenonah Park Properties, Inc. is based on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the report of other auditors provide a reasonable basis for our opinions. In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Bay City, Michigan, as of June 30, 2007, and the respective changes in financial position and cash flows, where applicable, thereof and the budgetary comparisons of the General Fund and major special revenue funds for the year then ended in conformity with accounting principles general accepted in the United States of America.

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In accordance with Government Auditing Standards, we have also issued our report dated December 27, 2007, on our consideration of the City of Bay City, Michigan’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The Management’s Discussion and Analysis and the historical pension supplementary information for the Police and Fire Retirement System listed in the table of contents, are not required parts of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Bay City, Michigan’s basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic financial statements. The introductory section, combining and individual fund financial statements and schedules, and statistical tables are presented for purposes of additional analysis and also are not a required part of the basic financial statements. The combining and individual fund financial statements and schedules and schedule of expenditure of federal awards have been subjected to the auditing procedures applied by us and the other auditors in the audit of the basic financial statements and, in our opinion, based on our audit and the report of other auditors, are fairly stated, in all material respects in relation to the basic financial statements taken as a whole. The introductory section and statistical tables, as listed in the table of contents, have not been subjected to the auditing procedures applied by us and the other auditors in the audit of the basic financial statements and, accordingly, we express no opinion on them.

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CITY OF BAY CITY, MICHIGAN MANAGEMENT’S DISCUSSION AND ANALYSIS

Our discussion and analysis of the City of Bay City’s financial performance provides an overview of the City’s financial activities for the fiscal year ended June 30, 2007. Please read it in conjunction with the City’s financial statements. Financial Highlights As discussed in further detail in this discussion and analysis, the following represents the most significant financial highlights for the year ended June 30, 2007: • The assets of the City of Bay City exceeded its liabilities at the close of the most

recent fiscal year by $196,956,459 (net assets). Of this amount, $43,628,148 (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens and creditors.

• Total net assets related to the City’s governmental activities decreased by $188,197

from the previous year and the business-type activities net assets increased by $561,656. The net assets of the component units also experienced a decrease of $1,507,936.

• At the close of the current fiscal year, the City of Bay City’s governmental funds

reported combined ending fund balances of $9,462,093, an increase of $234,620 in comparison with the prior year. All but $64,544 of this total amount is available for spending at the government’s discretion (unreserved fund balance).

• At the end of the fiscal year, unreserved fund balance for the General Fund was

$5,086,051 or about 23.5% of the total General Fund expenditures. • The City of Bay City’s total debt decreased by $2,641,951, or 3%, during the fiscal

year. • The City continues its commitment to improving its road infrastructure and this year

spent $2,216,814 on new road construction and resurfacing and an additional $414,684 on new sidewalks. These projects were primarily funded by grant dollars.

• State-shared revenue, the City’s second largest revenue source in the general fund,

decreased for the sixth consecutive year. The State of Michigan reduced the City’s allocation by $43,744 from the amount received in the previous fiscal year. The City anticipated a reduction and responded with careful review and control of expenditures such as reducing capital expenditures and leaving vacant positions unfilled in the public safety and parks and recreations departments. As a result, there was a decrease of $267,185 in the fund balance of the general fund. However, this reduction was $444,054 less than the amount projected in the final amended budget.


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Using this Annual Report This annual report consists of a series of financial statements. The Statement of Net Assets and the Statement of Activities provide information about the activities of the City of Bay City as a whole and present a longer-term view of the City’s finances. This longer-term view uses the accrual basis of accounting to measure the cost of providing services during the current year, and whether the taxpayers have funded the full cost of providing government services. The Statement of Net Assets and the Statement of Activities distinguish functions of the City that are primarily supported by taxes and intergovernmental revenues from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, public works, community and economic development, and recreation and culture. The business-type activities of the City include electric, water, and sewer services, as well as municipal airport, cemetery, and marina facilities. The government-wide financial statements include not only the City itself (known as the primary government), but also the component units which are legally separate authorities for which the City is financially accountable. Financial information for the component units is reported separately from the financial information presented for the primary government itself. Complete financial statements for the Downtown Management Board may be obtained at their administrative offices located at Commerce One, 901 Saginaw Street, Bay City, Michigan 48708, and complete financial statements for Wenonah Park Properties, Inc. may be obtained at City Hall located at 301 Washington Avenue, Bay City, Michigan 48708. Separate financial statements for the remaining component units are not prepared. The Fund financial statements present a short-term view. They tell us how the taxpayers’ resources were spent during the year, as well as how much is available for future spending. Fund financial statements also report the City’s operations in more detail than the government-wide financial statements by providing information about the City’s most significant funds. The fund financial statements can be divided into three categories including governmental funds, proprietary funds, and fiduciary funds. The fiduciary fund statements provide information about activities for which the City acts solely as a trustee or agent for the benefit of those outside of the government. The City as a Whole For the fiscal year ended June 30, 2007, assets exceeded liabilities by $196,956,459. By far the largest portion of the City’s net assets (77 percent) reflects its investment in capital assets (i.e. land, buildings, vehicles, equipment and infrastructure), less any related debt used to acquire those assets that is still outstanding. The City uses these


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assets to provide services to citizens, consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The following table shows, in a condensed format, the net assets as of June 30, 2007 (in thousands of dollars):

Government Activities

Business-type Activities

Total

2006 2007 2006 2007 2006 2007 Current and other assets $ 19,252 $ 20,785 $ 36,922 $ 35,987 $ 56,174 $ 56,772 Capital assets 79,751 78,544 155,659 153,831 235,410 232,375

Total assets 99,003 99,329 192,581 189,818 291,584 289,147 Current and other liabilities 3,211 3,794 3,401 2,650 6,612 6,444 Long-term liabilities 20,925 20,857 67,464 64,890 88,389 85,747

Total liabilities 24,136 24,651 70,865 67,540 95,001 92,191 Net Assets: Invested in capital assets – Net of related debt

$ 61,608

$ 60,760

$ 89,473

$ 90,735

$ 151,081

$ 151,495

Restricted 1,670 1,833 - - 1,670 1,833 Unrestricted 11,589 12,085 32,243 31,543 43,832 43,628 Total net assets $ 74,867 $ 74,678 $ 121,716 $ 122,278 $ 196,583 $ 196,956

The City’s governmental activities net assets decreased by $188,197 while the net assets of its business-type activities increased by $561,656. The change in net assets for the governmental activities was primarily due to the use of fund balance in the General Fund - expenditures and transfers out exceeded revenues by $267,185. The increase in net assets of the business type activities is attributable to the grant funds received to purchase capital assets in the James Clements Airport Fund and the higher than anticipated interest earnings. As a result, the combined net assets increased by $373,459 from $196,583,000 in 2006 to $196,956,459 in 2007. As we look at the governmental activities separately from the business-type activities, we can see that the current level of unrestricted net assets – the part of net assets that may be used to meet the government’s ongoing obligations to citizens and creditors – is $12,085,327, or about 35% of the governmental activities expenditures. An additional portion of the City’s net assets of its governmental activities, approximately 2.5%, represents resources that are subject to external restrictions on how they may be used.


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The following table shows the changes of the net assets during the current year (in thousands of dollars):

Governmental Activities Business-type Activities Totals 2006 2007 2006 2007 2006 2007 Revenue Program revenue Charges for services $ 8,127 $ 7,600 $ 42,702 $ 45,221 $ 50,829 $ 52,821 Operating grants and contributions 5,797 5,646 246 102 6,043 5,748 Capital grants and contributions 47 1,659 455 482 502 2,141 General revenue Property taxes 13,592 13,640 - - 13,592 13,640 Grants and contributions not restricted to specific programs

5,172

5,128

-

-

5,172

5,128

Unrestricted investment earnings 397 702 922 1,459 1,319 2,161 Miscellaneous 111 74 47 64 158 138

Total Revenue 33,243 34,449 44,372 47,328 77,615 76,649 Program Expenses General Government 5,289 5,543 - - 5,289 5,543 Public safety 14,170 14,640 - - 14,170 14,640 Public works 9,871 9,237 464 519 10,335 9,756 Community and economic

development

2,116

2,602

-

-

2,116

2,602 Recreation and culture 1,249 1,164 - - 1,249 1,164 Interest on long-term debt 1,298 1,302 - - 1,298 1,302 Electric - - 26,079 26,537 26,079 26,537 Water - - 7,231 7,694 7,231 7,694 Sewer - - 12,487 12,165 12,487 12,165

Total program expenses 33,993 34,488 46,261 46,915 80,254 81,403 Increase (decrease) in net assets

before transfers and special items

(750)

(39)

(1,889)

413

(2,639)

374 Transfers 3,525 (149) (3,525) ___ 149 - - Change in net assets 2,775 (188) (5,414) 562 (2,639) 374 Net assets beginning of year 72,092 74,866 127,130 121,716 199,222 196,582 Net assets end of year $ 74,867 $ 74,678 $ 121,716 $ 122,278 $ 196,583 $ 196,956

Governmental Activities The City’s total governmental net assets decreased by $188,197. Key elements of this decrease are as follows:

• Budgeted use of fund balance in the General Fund in the amount of $267,185. • Building Inspection revenues were down by approximately $134,000. • Program expenses exceeded program revenues by approximately $39,000.

However, these decreases were partially offset by a decrease in expenses due to a reduction in the workforce and closer management of resources to better control costs.


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Business-Type Activities The City’s business-type activities consist of the Electric, Water, Sewer, Airport, Cemetery, and Marina Funds. These services are provided to all City residents. Electrical services also extend to numerous customers outside of the City limits. In addition to City residents, the City provides water to residents of the City of Essexville, Hampton Township, and Bay County. The City provides sewage treatment through a City-owned sewage treatment plant. These services are also extended to Hampton Township and portions of Bangor, Monitor, and Portsmouth Townships. The business-type activities saw an overall increase in net assets of $561,656 due primarily to the following: • The Electric Fund experienced the largest increase in net assets of $360,125. While

operating expenses increased 2.5%, operating revenues increased by approximately 10%.

• The net assets of the James Clements Airport Fund increased by $201,986 due to the receipt of state and federal grants for its runway lighting project.

• All funds experienced an increase in interest earnings. • Although the Oakridge Cemetery Fund reported an increase in net assets of $6,699

and James Clements Airport Fund reported an increase in its net assets of $201,986, both funds continued to require subsidies from the general fund in the amounts of $83,821 and $53,263, respectively.

The City’s Funds An analysis of the City’s major funds begins on page 15, following the government-wide financial statements. The fund financial statements provide detailed information about the most significant funds, not the City as a whole. The City Commission creates funds to help manage monies for specific purposes as well as to show accountability for certain activities, such as a special property tax millage. The City’s major governmental funds for 2007 include the General Fund, Major Streets Fund and the Rehabilitation Fund. The General Fund is the chief operating fund of the City. The most significant source of revenue is property taxes, which generated $10,160,324 in 2007. The most significant service accounted for in this fund is public safety, which incurred expenses of $13,509,032 in 2007. Public safety expenditures equate to approximately 62% of the total expenditures and are more that the amount of property taxes generated. At the fiscal year ended June 30, 2007, the unreserved fund balance of the General Fund was $5,086,051. As a measure of the General Fund’s liquidly, it may be useful to compare the unreserved fund balance to total fund expenditures. Unreserved fund balance represents 23.5% of the total General Fund expenditures. The Major Streets Fund accounts for major streets maintenance funds received from the State of Michigan, as well as, property tax and other revenues used to maintain and reconstruct major streets within the City. During the fiscal year ended June 30, 2007, $1,941,961 was spent on capital outlay for reconstruction and resurfacing streets and


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an additional $2,562,150 was spent on preservation and maintenance of existing streets within this fund. The Rehabilitation Fund is used to account for revenues and expenditures related to providing financing to low and moderate income individuals to assist in home improvement. In the fiscal year ended June 30, 2007, $539,479 was spent to assist residents of the City with home improvements. Some notable items in the other governmental activities are: • The Local Street Fund expended $1,141,731 to maintain and preserve local streets

within the City and ended the year with an unreserved fund balance of $176,344. This amounts to 15% of annual expenditures within this fund.

• The Building Inspection Fund ended the fiscal year with a fund balance of $94,267.

This is the second year in a row that a General Fund subsidy was not required to support the operations of this fund.

• The Solid Waste Fund ended the fiscal year with an unreserved fund balance of

$512,858. This is the fifth year since the City went to a fee-based system versus a millage that no General Fund subsidy was required. The Solid Waste Fund paid back all previous subsidies from the General Fund as a result of a resolution passed by the City Commission requiring the reimbursement to occur once the fund became self sufficient.

• The Community Development Block Grant Fund expended $1,013,269 on economic

development activities and an additional $367,715 on capital outlay. • The Public Improvement Fund ended the year with an unreserved fund balance of

$1,036,375. The City Commission approved transfers from the General Fund totaling $1,047,352 in previous fiscal years in order to accumulate funding for the replacement of the roof on City Hall. Currently, $930,448 remains reserved for this project, which is expected to be completed in the near future.

• The Riverfront Redevelopment Fund expended $434,869 to complete site

improvements on the “Uptown at Rivers Edge” redevelopment project. Development of this site in expected within the next few years.


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General Fund Budgetary Highlights Over the course of the year, the City amended the budget to take into account events that occurred during the year. The most significant amendments occurred due to the following:

• The Human Resources Department increased their budget by $63,411 to pay attorney fees and another $31,560 to pay a consultant to assist with employment relations.

• The Police Department increased its budget by $60,000 to pay overtime within its Street Patrol Division and an additional $21,240 to purchase ammunition.

• Unspent funds from the previous year in the amount of $75,615 were carried forward to purchase: (1) a mail machine in the Treasurer’s office for $39,000, (2) equipment for the Police Department in the amount of $35,466, and (3) various miscellaneous items in the Engineering and Parks departments in the amount of $1,149.

The other differences between the original and final amended budget for expenditures were relatively minor. During the year, actual revenues were less than budgeted revenues by $506,904, however, actual expenditures were also less than budgetary estimates by $1,005,833. As a result, the General Fund experienced a decrease of $267,185 in fund balance instead of the budgeted reduction projected in the final amended budget to be $711,239. Capital Assets and Debt Administration The City’s investment in capital assets for its governmental and business-type activities as of June 30, 2007 amounted to $232,374,448 (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements, machinery and equipment, park facilities, roads, sidewalks, and bridges. Major capital asset events during the fiscal year included the following:

• The Sewer Fund spent $1,156,394 on various capital projects including $452,060 to replace the sanitary sewer system associated with the Henry Street reconstruction project.

• The construction phase of the North Henry project was completed with

$1,024,149 spent during the year and an additional $901,029 was spent on the Wenona Street project.

• The Water Fund spent $1,920,195 to complete the North Lagoon Reclamation

Project.


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• The Electric Fund completed various capital projects totaling $1,584,674 including $530,341 on the Bay Medical Substation.

• James Clements Airport completed its runway project totaling $249,000.

• The Marquette Avenue Streetscape project was completed in the amount of

$234,867. The investment in capital assets of the component units totals $32,250,645 as of June 30, 2007. Some of the capital activities completed during the year include the Marina Drive extension in the amount of $192,098; the parking lot at Henry and John streets in the amount of $144,040; repaving the Liberty Harbor parking lot at a cost of $39,368; an additional $52,392 to complete the Water Street Waterfall micro park; replacing the sidewalks in the Marquette district in the amount of $204,636 and various streetscaping projects totaling $71,234. Additional information on the City’s capital assets can be found in Note 5 of this report. Long-term Debt. In the fiscal year ended June 30, 2007, the City had total outstanding debt of $85,746,966, which included a current portion of $8,000,427. Of this amount, $78,631,966 is backed by the full faith and credit of the City. The remainder of the City’s debt represents bonds secured by specific sources (revenue bonds). The long-term debt can be summarized as follows: 2006 2007

General obligation bonds $ 33,669,130 $ 32,152,577 Revenue bonds 8,315,000 7,115,000 Other notes/leases payable 42,344,235 41,594,757 Compensated absences 4,060,552 4,884,632

Total $ 88,388,917 $ 85,746,966 The City’s total debt decreased by $2,641,951 during the fiscal year. State statute limits the amount of general obligation debt a governmental entity may issue to 10 percent of its total assessed valuation. The current debt limitation for the City is $75,024,000 which is significantly in excess of the City’s outstanding general obligation debt applicable to this limit. Additional information on the City’s long-term debt can be found in Note 8 of this report. Economic Factors and Next Year’s Budgets and Rates Because of the State of Michigan’s economic conditions, state-shared revenues, the second largest source of revenue in the General Fund, continues to be an important factor in the preparation of the City’s budget. Additional reductions have been forecast for the next fiscal year. The City also faces a continued rise in healthcare costs. While this year the City’s healthcare costs remained approximately the same as the previous year, additional increases are expected in the future.


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Another issue of concern to the City is the unfunded liability in its defined benefit retirement plan of approximately $25 million. In the fiscal year ended June 30, 2007, the City contributed an additional $1.5 million over and above the required contribution of $2 million. The City budgeted an additional contribution in the upcoming fiscal year and intends to continue this trend in future budgets as well. In addition, the City’s property taxes are at the limit allowed by Charter of 19 mills, which has been reduced by the Headlee Amendment to 16.9615 mills for general operating in the 2007/2008 budget. The City’s Electric, Water and Sewer Utilities instituted a rate increase in the year ended June 30, 2007. Additional rate increases are anticipated in the next fiscal year as well. These rate increases were necessary as a result of operating cost increases for all of the utilities and to finance debt service on the recently issued debt for both the Water and Wastewater Plant improvements and improvements to the sanitary sewer system. All three utilities will be evaluated on a yearly basis to determine the appropriate charges for services reflective of the cost of doing business. The City’s budget for the last several years has limited the amount of capital expenditures in all areas. Many necessary improvements have been delayed and will have to be addressed in the near future. The City remains committed to maintaining and improving its level of service to its citizens and intends to continue to invest in its capital assets. This is one of the many challenges that will need to be addressed in future budgets. Contacting the City’s Management The financial report is intended to provide our citizens, taxpayers, customers, and investors with a general overview of the City’s finances and to show the City’s accountability for the money it receives. If you have any questions about this report or need additional information, we welcome you to contact the Finance Department, 301 Washington Avenue, Bay City, Michigan 48708.

BASIC FINANCIAL STATEMENTSThe diverse nature of a governmental operation and the necessity of

complying with legal provisions require accounting systems unlike thosecommonly used by commercial enterprises. Rather than establishing a

single unified set of accounts for recording and summarizing allfinancial transactions, the accounts of a governmental unit

are organized on the basis of funds.

Government-Wide Financial StatementsThe Government-Wide Financial Statements were prepared to allow

the user of the financial report to obtain an overviewand broad perspective of the City of Bay City's

operation and financial position.

City of Bay City, MichiganStatement of Net Assets

June 30, 2007

Primary GovernmentGovernmental Business-type Component

Activities Activities Total Units

AssetsCash and investments 13,303,229$ 21,565,165$ 34,868,394$ 5,166,451$ Receivables 9,321,706 6,878,952 16,200,658 4,402,718 Internal balances (2,900,145) 2,900,145 - - Prepaid items and other assets 481,309 275,044 756,353 1,048,237 Inventories 176,524 2,463,184 2,639,708 37,999 Restricted investments - 726,295 726,295 3,081,731 Net pension asset 402,533 1,178,838 1,581,371 - Nondepreciable capital assets 18,125,336 973,818 19,099,154 2,499,959 Depreciable capital assets, net 60,418,725 152,856,569 213,275,294 29,750,686

Total assets 99,329,217 189,818,010 289,147,227 45,987,781

LiabilitiesAccounts payable and other accrued expenses 3,478,372 2,200,505 5,678,877 648,282 Interest payable 110,190 396,093 506,283 1,083,252 Unearned revenues 205,608 53,034 258,642 1,410 Noncurrent liabilities:

Due within one year 2,765,053 5,202,299 7,967,352 199,049 Due in more than one year 18,091,743 59,687,871 77,779,614 25,166,277

Total liabilities 24,650,966 67,539,802 92,190,768 27,098,270

Net AssetsInvested in capital assets, net of related debt 60,760,119 90,735,387 151,495,506 7,795,818 Restricted for:

Debt service 386,813 - 386,813 - Capital projects 1,445,992 - 1,445,992 3,081,731

Unrestricted 12,085,327 31,542,821 43,628,148 8,011,962

Total net assets 74,678,251$ 122,278,208$ 196,956,459$ 18,889,511$

The accompanying notes are an integral part of these financial statements.

-12-

City of Bay City, MichiganStatement of Activities

For the Year Ended June 30, 2007

Program RevenuesOperating Capital

Charges Grants and Grants and Net (Expense)Functions / Programs Expenses Indirect for Services Contributions Contributions Revenue

Primary governmentGovernmental activities:

General government 5,543,264$ (3,479,213)$ 1,255,577$ 490,244$ -$ (318,230)$ Public safety 14,625,205 14,920 810,762 149,067 - (13,680,296) Public works 9,160,001 76,746 1,973,029 3,080,727 1,659,368 (2,523,623) Recreation and cultural 1,163,610 - 10,020 20,040 - (1,133,550) Economic development 2,427,198 174,910 71,191 1,905,580 - (625,337) Interest on debt 1,301,603 - - - - (1,301,603)

Total governmental activities 34,220,881 (3,212,637) 4,120,579 5,645,658 1,659,368 (19,582,639)

Business-type activities:Electric 25,257,166 1,279,854 26,060,386 399 - (476,235) Water 6,752,489 941,268 7,245,634 - - (448,123) Sewer 11,235,153 929,753 11,726,339 22,612 218,939 (197,016) Oak Ridge Cemetery 125,280 - 42,421 - - (82,859) James Clements Airport 210,601 - 21,887 78,721 262,758 152,765 Liberty Harbor Marina 160,091 22,849 124,317 - - (58,623)

Total business-type activities 43,740,780 3,173,724 45,220,984 101,732 481,697 (1,110,091)

Total primary government 77,961,661$ (38,913)$ 49,341,563$ 5,747,390$ 2,141,065$ (20,692,730)$

Component unitsDowntown Development Authority 136,672$ 15,047$ 205,770$ -$ -$ 54,051$ Midland Street TIFA 102,226 1,502 - - - (103,728) Kresge's DDA 256 - - - - (256) Marquette District TIFA 192,318 11,489 - - - (203,807) Water Street DDA 257,255 5,910 - - 779 (262,386) Marina Development TIFA 7,125 3,725 - - - (10,850) Allen Healthcare DDA 4,808 - - - - (4,808) Research Center Development TIFA 24,483 - - - - (24,483) Knepp's DDA 1,728 1,240 - - - (2,968) Brownfield Redevelopment - - - - - - Columbus Avenue Management Board 6,372 - 7,600 996 - 2,224 Midland Street Management Board 15,461 - 19,000 - - 3,539 POWER EDC 27,288 - - - - (27,288) Downtown Management Board 252,648 - 57,984 80,996 - (113,668) Wenonah Park Properties 8,113,027 - 5,794,488 - - (2,318,539)

Total component units 9,141,667$ 38,913$ 6,084,842$ 81,992$ 779$ (3,012,967)$

continued…

-13-

City of Bay City, MichiganStatement of Activities (Concluded)For the Year Ended June 30, 2007

Primary GovernmentGovernmental Business-type Component

Functions/Programs Activities Activities Total Units

Changes in net assetsNet (expense) revenue (19,582,639)$ (1,110,091)$ (20,692,730)$ (3,012,967)$ General revenues:

Property taxes 13,640,017 - 13,640,017 1,013,769 Grants and contributions not restricted

to specific programs 5,127,490 - 5,127,490 - Unrestricted investment earnings 702,127 1,459,038 2,161,165 459,388 Miscellaneous revenue 73,702 63,815 137,517 31,874

Transfers - internal activities (148,894) 148,894 - -

Total general revenuesand transfers 19,394,442 1,671,747 21,066,189 1,505,031

Change in net assets (188,197) 561,656 373,459 (1,507,936)

Net assets, beginning of year 74,866,448 121,716,552 196,583,000 20,397,447

Net assets, end of year 74,678,251$ 122,278,208$ 196,956,459$ 18,889,511$


-14-

Fund Financial StatementsThese financial statements provide a more detailed view of the

Government-Wide Financial Statements presented in in the preceding subsection.

Other Total Major Rehabilitation Governmental Governmental

General Streets Fund Funds FundsAssetsCash and investments 5,116,203$ -$ -$ 3,277,826$ 8,394,029$ Receivables (net of allowance for uncollectibles): Accounts 169,685 12,553 4,500 442,403 629,141 Delinquent taxes 99,505 - - 15,579 115,084 Special assessments 63,587 - - 33,965 97,552 Accrued interest 48,062 - - 25,897 73,959 Notes - - 7,176,032 - 7,176,032 Due from other funds 393,171 259,826 2,050 218,869 873,916 Due from other governments 271,603 629,053 67,322 289,643 1,257,621 Inventories - 64,544 - - 64,544 Other assets 802 - - - 802

Total Assets 6,162,618$ 965,976$ 7,249,904$ 4,304,182$ 18,682,680$

Liabilities and fund balances

LiabilitiesAccounts payable 540,237$ 45,699$ 47,091$ 209,916$ 842,943$ Accrued liabilities 331,197 21,355 - 42,045 394,597 Due to other funds 50,143 331,849 22,281 198,782 603,055 Due to other governmental units 1,099 - - - 1,099 Deposits 2,202 - - 21,592 23,794 Deferred revenue 151,689 - 7,180,532 22,878 7,355,099

Total liabilities 1,076,567 398,903 7,249,904 495,213 9,220,587

Fund balances Reserved for: Inventories - 64,544 - - 64,544 Unreserved, reported in: General Fund 5,086,051 - - - 5,086,051 Special Revenue Funds - 502,529 - 1,976,164 2,478,693 Debt Service Funds - - - 386,813 386,813 Capital Project Funds - - - 1,445,992 1,445,992

Total fund balances 5,086,051 567,073 - 3,808,969 9,462,093

Total liabilities and fund balances 6,162,618$ 965,976$ 7,249,904$ 4,304,182$ 18,682,680$


June 30, 2007

City of Bay City, MichiganBalance Sheet

Governmental Funds

-15-

City of Bay City, MichiganReconciliation of the Governmental Funds Balance Sheet

to the Statement of Net AssetsJune 30, 2007

Fund balances - total governmental funds 9,462,093$

Capital assets used in governmental activities are not financial resources, and are therefore notreported in the funds.

Add: capital assets 152,468,876 Subtract: accumulated depreciation (79,425,035)

Net pension assets of governmental activities are not financial resources, and are therefore notreported in the funds.

Add: net pension asset 402,533

Because the focus of governmental funds is on short-term financing, some assets will not beavailable to pay for current-period expenditures. Those assets (such as certain receivables) areoffset by deferred revenues in the governmental funds, and thus are not included in fund balance.

Add: deferred receivables 7,355,099 Subtract: allowance for doubtful accounts (55,749)

Internal service funds are used by management to charge the costs of certain activities, such asinsurance and other centralized costs, to individual funds. The assets and liabilities of certaininternal service funds are included in governmental activities in the statement of net assets.

Add: net assets of governmental activities accounted for in internal service funds 4,959,117

Certain liabilities, such as bonds payable, are not due and payable in the current period, andtherefore are not reported in the funds.

Add: unamortized issuance costs 35,588 Subtract: interest payable (106,608) Subtract: bonds payable (17,462,577) Subtract: capital leases (22,717) Subtract: compensated absences (2,932,369)

Net assets of governmental activities 74,678,251$


Amounts reported for governmental activities in the statement of net assets are different because:

-16-

City of Bay City, MichiganStatement of Revenues, Expenditures and Changes in Fund Balances

Governmental FundsFor the Year Ended June 30, 2007

Other TotalGeneral Major Rehabilitation Governmental Governmental

Fund Streets Fund Funds Funds

Revenues Taxes 10,160,324$ 720,055$ -$ 1,935,105$ 12,815,484$ Licenses and permits 17,887 - - 514,465 532,352 Intergovernmental 6,637,822 3,960,331 272,894 2,701,818 13,572,865 Charges for services 3,932,944 - - 1,923,317 5,856,261 Fines and forfeitures 106,239 - - 25,772 132,011 Interest revenue 395,378 17,983 7,902 191,713 612,976 Miscellaneous revenues 332,705 13,492 216,897 311,498 874,592

Total revenues 21,583,299 4,711,861 497,693 7,603,688 34,396,541

ExpendituresCurrent: General government 5,609,384 - - - 5,609,384 Public safety 13,509,032 - - 849,398 14,358,430 Public works 1,240,507 2,562,150 - 1,134,731 4,937,388 Physical environment - - - 1,839,735 1,839,735 Parks and recreation 1,004,941 - - - 1,004,941 Economic development - - 539,479 1,244,082 1,783,561 Capital outlay 217,881 1,941,961 - 681,071 2,840,913 Debt service: Principal retirement 42,500 - - 1,595,000 1,637,500 Interest and fiscal charges - - - 1,175 1,175

Total expenditures 21,624,245 4,504,111 539,479 7,345,192 34,013,027

Excess of revenues over(under) expenditures (40,946) 207,750 (41,786) 258,496 383,514

Other financing sources (uses)Transfer in - 75,521 266,585 498,954 841,060 Transfer out (226,239) - (224,799) (538,916) (989,954)

Total other financing sources (uses) (226,239) 75,521 41,786 (39,962) (148,894)

Changes in fund balances (267,185) 283,271 - 218,534 234,620

Fund balances - beginning of year 5,353,236 283,802 - 3,590,435 9,227,473

Fund balances - end of year 5,086,051$ 567,073$ -$ 3,808,969$ 9,462,093$


-17-

City of Bay City, MichiganReconciliation of the Statement of Revenues, Expenditures

and Changes in Fund Balancesof Governmental Funds to the Statement of Activities


Net change in fund balances - total governmental funds 234,620$

Governmental funds report capital outlays as expenditures. However, in the statement of activities, the costof those assets is allocated over their estimated useful lives and reported as depreciation expense.

Add: capital outlay 3,294,103 Subtract: net value of assets disposed (1,069,673) Subtract: depreciation expense (3,652,476)

Revenues in the statement of activities that do not provide current financial resources are not reported asrevenues in the funds, but rather are deferred to the following fiscal year.

Subtract: current year change in long-term receivables (8,429)

Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net assets. Repayment of bond principal is an expenditure in thegovernmental funds, but the repayment reduces long-term liabilities in the statement of net assets.

Add: principal payments on bonds 1,595,000 Add: principal payments on capital leases 22,647 Add: decrease in interest accrued on bonds 351 Subtract: deferred bond issuance costs (5,931) Subtract: interest expense on zero coupon bond (1,283,447)

Some expenses reported in the statement of activities do not require the use of current financial resources andtherefore are not reported as expenditures in governmental funds.

Subtract: increase in the accrual of compensated absences (310,259) Add: increase in the net pension asset 402,533

Internal service funds are used by management to charge the costs of certain activities, such as insurance andother centralized costs, to individual funds. The net revenue (expense) of certain internal service funds isreported with governmental activities.

Add: net operating loss from governmental activities accounted for in internal service funds 490,221 Add: nonoperating revenue recorded in internal service funds 102,543

Change in net assets of governmental activities (188,197)$


Amounts reported for governmental activities in the statement of activities are different because:

-18-

City of Bay City, MichiganGeneral Fund

Statement of Revenues, Expenditures and Changes in Fund BalanceBudget and Actual


Variance withOriginal Final FinalBudget Budget Actual Budget

RevenuesTaxes 10,270,739$ 10,270,739$ 10,160,324$ (110,415)$ Licenses and permits 17,675 17,675 17,887 212 Intergovernmental 7,241,051 7,241,051 6,637,822 (603,229) Charges for services 3,929,088 3,929,088 3,932,944 3,856 Fines and forfeitures 111,500 111,500 106,239 (5,261) Interest revenue 297,000 297,000 395,378 98,378 Miscellaneous revenues 201,348 223,150 332,705 109,555

Total revenues 22,068,401 22,090,203 21,583,299 (506,904)

ExpendituresCurrent:

General governmentMayor 17,968 17,968 14,115 3,853 City commission 102,822 102,822 93,092 9,730 City manager 286,620 286,620 285,138 1,482 Promotional 16,500 16,500 16,224 276 Community development 166,852 166,852 193,604 (26,752) Elections 84,466 84,466 61,204 23,262 Auditing 50,500 50,500 49,433 1,067 Assessor 443,318 443,318 446,661 (3,343) Attorney 176,000 176,000 162,546 13,454 City clerk 307,248 307,248 306,439 809 Payroll/payables 178,269 178,269 182,333 (4,064) Finance department 327,184 327,184 217,772 109,412 Accounting 399,391 399,391 398,198 1,193 Accounts receivable 991,034 991,034 981,736 9,298 Meter reading 408,803 408,803 420,151 (11,348) Human resources 298,821 393,792 351,809 41,983 Purchasing 325,278 325,278 325,199 79 Treasurer 293,358 293,358 287,578 5,780 Public relations 46,385 46,385 45,141 1,244 Planning and zoning 1,035,042 1,035,042 517,161 517,881 Economic development 248,372 248,372 246,868 1,504 Contingencies 77,802 83,052 6,982 76,070

Total general government 6,264,065 6,364,286 5,609,384 769,017

-19-

City of Bay City, MichiganGeneral Fund


For the Year Ended June 30, 2007Variance with

Original Final FinalBudget Budget Actual Budget

Expenditures (continued)Public safety

C.O.P.S. program 106,000$ 106,000$ 102,165$ 3,835$ Safe Streets Task Force - - 18,190 (18,190) Police support 1,103,000 1,091,604 1,110,506 (18,902) Drive Michigan safely - - 16,918 (16,918) Special event overtime 50,000 47,000 41,890 5,110 Police in-service training 40,500 32,500 33,774 (1,274) School guards 13,209 12,209 11,693 516 Street patrol 4,535,167 4,598,167 4,542,377 55,790 Police chief 123,076 105,676 83,667 22,009 Deputy police chiefs 253,670 239,966 223,237 16,729 Police command officers 1,165,288 1,226,288 1,140,174 86,114 Fire department 6,215,877 6,215,877 6,184,441 31,436

Total public safety 13,605,787 13,675,287 13,509,032 166,255

Public worksCity hall and grounds 296,778 296,778 277,744 19,034 Engineering 535,647 535,647 514,899 20,748 Street lighting 421,702 421,702 447,164 (25,462) Environmental 2,700 2,700 700 2,000

Total public works 1,256,827 1,256,827 1,240,507 16,320

Parks and recreation 1,094,606 1,102,038 1,004,941 97,097

Capital outlay 73,300 175,025 217,881 (42,856)

Debt Service:Principal 42,500 42,500 42,500 -

Total expenditures 22,294,585 22,573,463 21,624,245 1,005,833

Excess of revenues over(under) expenditures (226,184) (483,260) (40,946) (1,512,737)

Other financing sources (uses)Transfer out (227,979) (227,979) (226,239) 1,740

Changes in fund balances (454,163) (711,239) (267,185) 444,054

Fund balances - beginning of year 5,353,236 5,353,236 5,353,236 - Fund balances - end of year 4,899,073$ 4,641,997$ 5,086,051$ 444,054$


-20-


Revenues Taxes: Property taxes 721,159$ 721,159$ 720,055$ (1,104)$ Intergovernmental: Federal - - 1,659,368 1,659,368 State 2,323,491 2,323,491 2,300,963 (22,528) Miscellaneous: Interest earnings 6,000 6,000 17,983 11,983 Reimbursements 1,000 1,000 5,098 4,098 Other 24,000 24,000 8,394 (15,606)

Total revenues 3,075,650 3,075,650 4,711,861 1,636,211

Expenditures Public works Highways, streets, and bridges 3,743,100 3,891,621 2,562,150 1,329,471 Capital outlay 1,020,100 1,020,100 1,941,961 (921,861)

Total expenditures 4,763,200 4,911,721 4,504,111 407,610

Excess of revenues over(under) expenditures (1,687,550) (1,836,071) 207,750 2,043,821

Other financing sources (uses) Proceeds from the issuance of debt 6,640,000 6,640,000 - (6,640,000) Transfer in 40,000 75,521 75,521 -

Total other financing sources (uses) 6,680,000 6,715,521 75,521 (6,640,000)

Changes in fund balances (1,647,550) (1,760,550) 283,271 2,043,821

Fund balances - beginning of year 283,802 283,802 283,802 -

Fund balances - end of year (1,363,748)$ (1,476,748)$ 567,073$ 2,043,821$



City of Bay City, MichiganMajor Streets Fund


-21-

City of Bay City, MichiganRehabilitation Fund




Revenues Intergovernmental: Federal 258,107$ 258,107$ 272,894$ 14,787$ Miscellaneous: Program income 193,800 193,800 216,897 23,097 Interest earnings 6,200 6,200 7,902 1,702

Total revenues 458,107 458,107 497,693 39,586

Expenditures Economic development 591,166 591,166 539,479 51,687

Excess of revenues over(under) expenditures (133,059) (133,059) (41,786) 91,273

Other financing sources (uses) Transfer in 320,089 320,089 266,585 (53,504) Transfer out (200,000) (200,000) (224,799) (24,799)

Total other financing sources (uses) 120,089 120,089 41,786 (78,303)

Changes in fund balances (12,970) (12,970) - 12,970

Fund balances - beginning of year - - - -

Fund balances (deficit) - end of year (12,970)$ (12,970)$ -$ 12,970$


-22-

City of Bay City, MichiganStatement of Net Assets

Proprietary FundsJune 30, 2007

Other Internal

Enterprise Service Electric Water Sewer Funds Total Funds

Current assetsCash and cash equivalents 10,193,339$ 5,628,645$ 5,460,417$ 282,764$ 21,565,165$ 4,909,200$ Receivables (net of allowance for uncollectibles) Accounts 4,152,944 693,333 1,741,236 8,153 6,595,666 5,998 Special assessments 54,416 10,317 35,964 - 100,697 - Accrued interest 88,701 48,978 37,663 2,381 177,723 22,068 Due from other funds 62,603 7,692 4,726 - 75,021 462,621 Due from other governments 4,866 - - - 4,866 - Inventories 1,709,696 515,129 225,031 13,328 2,463,184 111,980 Prepaid expenses - - - - - 114,126 Deposits - 8,350 340 - 8,690 330,793

Total current assets 16,266,565 6,912,444 7,505,377 306,626 30,991,012 5,956,786

Long-term assetsRestricted assets Debt service funds -

investments 726,295 - - - 726,295 -

Other assetsNet pension asset 519,837 326,203 332,798 - 1,178,838 - Unamortized debt expense - - 266,354 - 266,354 -

Total other assets 519,837 326,203 599,152 - 1,445,192 -

Capital assetsLand and improvements 182,602 4,004,791 12,393,801 4,906,941 21,488,135 - Air rights - - - 95,421 95,421 - Buildings 1,952,258 1,566,030 26,251 645,344 4,189,883 - Machinery and equipment 3,300,151 1,169,303 1,803,264 93,180 6,365,898 12,811,486 Utility plant in service 60,009,700 53,968,783 146,696,793 - 260,675,276 - Construction in progress - - 29,500 27,473 56,973 -

65,444,711 60,708,907 160,949,609 5,768,359 292,871,586 12,811,486 Less: accumulated depreciation 35,168,415 35,331,530 66,632,821 1,908,433 139,041,199 7,311,266

Net capital assets 30,276,296 25,377,377 94,316,788 3,859,926 153,830,387 5,500,220

Total long-term assets 31,522,428 25,703,580 94,915,940 3,859,926 156,001,874 5,500,220

Total assets 47,788,993 32,616,024 102,421,317 4,166,552 186,992,886 11,457,006

-23-

Other Internal Enterprise Service

Electric Water Sewer Funds Total FundsLiabilitiesCurrent liabilitiesAccounts payable 1,087,194$ 407,299$ 156,566$ 33,275$ 1,684,334$ 487,381$ Accrued liabilities 141,144 71,862 70,492 316 283,814 27,528 Due to other funds 41,095 163,960 250,737 4,873 460,665 347,838 Due to other governmental units 72,033 10,543 - - 82,576 879 Interest payable - 30,573 365,520 - 396,093 3,582 Claims payable - - - - - 1,700,151 Deposits 113,682 36,099 - - 149,781 - Deferred revenue - 53,034 - - 53,034 205,608 Accrued compensated absences - current 237,566 218,938 140,795 - 597,299 84,441 Notes payable - current - - - - - 42,685 Bonds payable - current 1,270,000 250,000 3,085,000 - 4,605,000 -

Total current liabilities 2,962,714 1,242,308 4,069,110 38,464 8,312,596 2,900,093

Long-term liabilitiesAccrued compensated absences 527,629 398,849 271,393 - 1,197,871 72,652 Notes payable - - - - - 239,355 Bonds payable 5,845,000 5,505,000 47,140,000 - 58,490,000 -

Total long-term liabilities 6,372,629 5,903,849 47,411,393 - 59,687,871 312,007

Total liabilities 9,335,343 7,146,157 51,480,503 38,464 68,000,467 3,212,100

Net assetsInvested in capital assets, net of related debt 23,161,296 19,622,377 44,091,788 3,859,926 90,735,387 5,218,180

Unrestricted 15,292,354 5,847,490 6,849,026 268,162 28,257,032 3,026,726

Total net assets 38,453,650$ 25,469,867$ 50,940,814$ 4,128,088$ 118,992,419$ 8,244,906$


-23-

City of Bay City, MichiganReconciliation of the Enterprise Funds Statement of Net Assets

to the Business-type Activities in the Statement of Net AssetsJune 30, 2007

Net assets - total enterprise funds 118,992,419$

Internal service funds are used by management to charge the costs ofcertain activities, such as insurance and other centralized costs, toindividual funds. The assets and liabilities of certain internal servicefunds are included in business-type activities in the statement of netassets.

Add: net assets of business-type activities accounted for in internal service funds 3,285,789

Net assets of business-type activities 122,278,208$


-24-

City of Bay City, MichiganProprietary Funds

Statement of Revenues, Expenses and Changes in Net AssetsFor the Year Ended June 30, 2007


Electric Water Sewer Funds Total Funds

Operating revenues Charges for services:

Sales 25,530,943$ 7,229,486$ 11,713,997$ 123,539$ 44,597,965$ 17,481,092$ Rents - - - 128,270 128,270 -

Miscellaneous 572,797 22,449 26,310 15,729 637,285 699,795

Total operating revenues 26,103,740 7,251,935 11,740,307 267,538 45,363,520 18,180,887

Operating expenses Cost of sales and service 20,395,987 5,231,569 5,964,340 373,479 31,965,375 2,901,866 Administration 3,667,036 1,103,245 950,362 - 5,720,643 185,829 Claims and benefits - - - - - 13,279,413 Depreciation 2,164,783 1,349,969 3,931,703 152,148 7,598,603 936,962

Total operating expenses 26,227,806 7,684,783 10,846,405 525,627 45,284,621 17,304,070

Operating income (loss) (124,066) (432,848) 893,902 (258,089) 78,899 876,817

Nonoperating revenues (expenses)Intergovernmental:

Federal grants - - 218,939 20,000 238,939 - State grants 399 - 22,612 242,758 265,769 -

Interest earnings 881,282 299,748 264,354 13,654 1,459,038 89,151 Interest expense (409,300) (111,761) (1,474,914) - (1,995,975) (11,402) Net loss on diposal of capital assets - - - - - 24,794 Amortization of bond

discount/deferred costs - - (20,504) - (20,504) -

Total nonoperating revenues (expenses) 472,381 187,987 (989,513) 276,412 (52,733) 102,543

Income (loss) before transfers 348,315 (244,861) (95,611) 18,323 26,166 979,360

Transfers Transfer in 111,810 - - 137,084 248,894 - Transfer out (100,000) - - - (100,000) -

Total transfers 11,810 - - 137,084 148,894 -

Changes in net assets 360,125 (244,861) (95,611) 155,407 175,060 979,360

Net assets - beginning of year 38,093,525 25,714,728 51,036,425 3,972,681 118,817,359 7,265,546

Net assets - end of year 38,453,650$ 25,469,867$ 50,940,814$ 4,128,088$ 118,992,419$ 8,244,906$


-25-

City of Bay City, MichiganReconciliation of the Enterprise Funds Statement of Revenues, Expenses and

Changes in Net Assets to the Business-type Activities in the Statement of ActivitiesFor the Year Ended June 30, 2007

Net change in net assets - total enterprise funds 175,060$

Internal service funds are used by management to charge the costs ofcertain activities, such as insurance and other centralized costs, toindividual funds. The net revenue (expense) of certain internal servicefunds is reported with business-type activities.

Add: net operating gain from business-type activities accounted for in internal service funds 386,596

Change in net assets of business-type activities 561,656$


-26-

City of Bay City, MichiganProprietary Funds

Combining Statement of Cash FlowsFor the Year Ended June 30, 2007


Electric Water Sewer Funds Total Funds

Cash flows from operating activitiesCash received from customers and users 25,236,674$ 8,514,784$ 11,682,848$ 266,442$ 45,700,748$ -$ Cash received from internal users - 133,491 - 3,792 137,283 18,345,929 Cash payments to suppliers for goods and services (19,574,287) (2,390,382) (3,153,073) (384,701) (25,502,443) (13,909,081) Cash payments to employees for services (4,710,088) (3,740,068) (3,698,586) (12,721) (12,161,463) (1,378,592) Cash payments for internal services provided (1,192,175) - (179,534) - (1,371,709) - Other operating revenues 572,797 22,449 26,310 15,729 637,285 -

Net cash provided (used) by operating activities 332,921 2,540,274 4,677,965 (111,459) 7,439,701 3,058,256

Cash flows from noncapital financing activitiesIntergovernmental - federal grant - - 218,939 20,000 238,939 - Intergovernmental - state grant 399 - 22,612 242,758 265,769 - Net pension asset (519,837) (326,203) (332,798) - (1,178,838) - Transfers in 111,810 - - 137,084 248,894 - Transfers (out) (100,000) - - - (100,000) -

Net cash flows provided (used ) by noncapital financing activities (507,628) (326,203) (91,247) 399,842 (525,236) -

Cash flows from capital and related financing activitiesPurchase of capital assets (1,584,674) (2,727,076) (1,156,394) (301,782) (5,769,926) (1,168,476) Proceeds from the sale of capital assets - - - - - 34,894 Proceeds from issuing long-term debt - 1,349,273 - - 1,349,273 - Principal paid on debt (1,200,000) (245,000) (2,995,000) - (4,440,000) (41,104) Interest paid on debt (409,300) (111,761) (1,474,914) - (1,995,975) (11,402)

Net cash (used) by capital and related financing activities (3,193,974) (1,734,564) (5,626,308) (301,782) (10,856,628) (1,186,088)

Cash flows from investing activitiesProceeds from sale of investments 117,424 - - - 117,424 - Interest earnings 881,282 299,748 264,354 13,654 1,459,038 89,151

Net cash provided (used) by investment activities 998,706 299,748 264,354 13,654 1,576,462 89,151

Net increase (decrease) in cash and cash equivalents (2,369,975) 779,255 (775,236) 255 (2,365,701) 1,961,319

Cash and cash equivalents, beginning of period 12,563,314 4,849,390 6,235,653 282,509 23,930,866 2,947,881

Cash and cash equivalents, end of period 10,193,339$ 5,628,645$ 5,460,417$ 282,764$ 21,565,165$ 4,909,200$

Reconciliation of operating income to net cash provided by operating activities

Operating income (loss) (124,066)$ (432,848)$ 893,902$ (258,089)$ 78,899$ 876,817$

Adjustments to reconcile operating income to net cash provided (used) by operating activities:

Depreciation 2,164,783 1,349,969 3,931,703 152,148 7,598,603 936,962 (Increase) decrease in assets:

Accounts receivable (345,926) (63,129) (33,498) 9,710 (432,843) 18,271 Special assesments receivable 4,992 (1,790) (15,117) - (11,915) - Accrued interest receivable 47,067 3,429 17,466 639 68,601 (9,081) Due from other funds (62,603) 17,653 32,322 624 (12,004) (177,732) Due from other governments (402) 1,293,754 - 4,284 1,297,636 - Inventories 9,353 (993) (61,227) (13,328) (66,195) 19,225 Prepaid expenses - 375,000 - - 375,000 706,770 Deposits - 120 (340) - (220) (74,075)

Increase (decrease) in liabilities:Accounts payable (472,794) (396,583) 20,108 (11,243) (860,512) 135,727 Accrued liabilities 47,900 (6,743) 135 4 41,296 (22,351) Claims payable - - - - - 306,387 Due to other funds (1,129,572) 115,838 (211,856) 3,792 (1,221,798) 333,584 Due to other governmental units 10,366 10,543 - - 20,909 709 Interest payable - 17,817 (20,606) - (2,789) (522) Deposits (6,679) 3,429 - - (3,250) - Accrued compensated absences 190,502 201,774 124,973 - 517,249 (3,428) Deferred revenue - 53,034 - - 53,034 10,993

Total adjustments 456,987 2,973,122 3,784,063 146,630 7,360,802 2,181,439

Net cash provided (used) by operating activities 332,921$ 2,540,274$ 4,677,965$ (111,459)$ 7,439,701$ 3,058,256$


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City of Bay City, MichiganFiduciary Funds

Statement of Net AssetsJune 30, 2007

Pension andOther Employee

Benefit Trust AgencyFunds Funds

Cash and cash equivalents 2,801,606$ 148,306$ Investments

Mutual funds 19,959,227 - Government securities 10,025,428 - Corporate bonds 2,925,872 - Common stock 22,918,116 -

Accounts receivable 187,192 - Interest receivable 195,856 -

Total assets 59,013,297 148,306$

LiabilitiesAccounts payable 100,011 48,177$ Due to other governments - 78,928 Deposits payable - 21,201

Total liabilities 100,011 148,306$

Net assetsHeld in trust for employees' pension benefits 55,490,980 Held in trust for employees' postemployment health care benefits 3,422,306

Total net assets 58,913,286$


Assets

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City of Bay City, MichiganStatement of Changes in Plan Net Assets

Pension and Other Employee Benefit Trust FundsFor the Year Ended June 30, 2007

AdditionsContributions

Employer 2,703,095$ Plan members 520,599

Total contributions 3,223,694

Investment income Interest and dividends 1,268,826 Net appreciation in fair value of investments 6,473,898

Investment expense (349,470)

Net investment income 7,393,254

Other additions 32,524

Total additions 10,649,472

DeductionsBenefits and refunds paid to participants 4,273,618 Administrative expenses 135,706

Total deductions 4,409,324

Net increase in plan net assets 6,240,148

Net assets held in trust for pension benefitsBeginning of year 52,673,138

End of year 58,913,286$


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Allen Downtown Marquette Water Marina Health-

Development Midland St. Kresge's District Street Develop. careAuthority TIFA DDA TIFA DDA TIFA DDA

Cash and cash equivalents 136,218$ 151,569$ 45,144$ 1,287,788$ 867,988$ 81,742$ 1,532$ Investments - - - - - - - Receivables: Accounts 11,114 - - - - - - Delinquent taxes 4,924 - - - - - - Accrued interest 1,185 1,319 393 11,206 7,553 711 13 Notes - - - - - - - Due from other governments - - - - - - - Inventories - - - - - - - Prepaid items - - - - - - - Restricted investments - - - - - - - Nondepreciable capital assets - 25,697 - 40,749 56,306 197,265 - Depreciable capital assets, net 137,143 339,228 7,108 1,229,951 2,256,351 326,553 - Deferred financing costs - - - - - - -

Total assets 290,584 517,813 52,645 2,569,694 3,188,198 606,271 1,545

LiabilitiesAccounts payable 48,060 26,162 - 55,776 74,419 64,266 - Accrued liabilities - - - 1,518 - - - Interest payable - - - - 15,255 - - Deposits 25 - - - - - - Deferred revenue - - - - - - - Long-term debt: Bonds payable - - - - 2,470,000 - - Notes payable - - - - - - 45,326

Total liabilities 48,085 26,162 - 57,294 2,559,674 64,266 45,326

Net assetsInvested in capital assets, net

of related debt 137,143 364,925 7,108 1,270,700 (157,343) 523,818 - Restricted for deposits held

with bond trustee - - - - - - - Unrestricted (deficit) 105,356 126,726 45,537 1,241,700 785,867 18,187 (43,781)

Total net assets 242,499$ 491,651$ 52,645$ 2,512,400$ 628,524$ 542,005$ (43,781)$


Assets

City of Bay City, MichiganAll Component Units

Combining Statement of Net AssetsJune 30, 2007

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Research ColumbusCenter Brownfield Avenue Midland St. Downtown Wenonah

Develop. Knepp's Redevelopment Mgmt. Mgmt. Mgmt. ParkTIFA DDA Authority Board Board P.O.W.E.R. EDC Board Properties Totals

42,845$ 42,124$ 14,725$ 9,491$ 22,629$ 1,137,858$ 106$ 55,691$ 269,001$ 4,166,451$ - - - - - 1,000,000 - - - 1,000,000

- - - - 40 138,042 - 1,003 144,188 294,387 - - - - - - - - - 4,924

373 367 128 - - - - - - 23,248 - - - - - 4,000,000 - - - 4,000,000 - - - - - - - 80,159 - 80,159 - - - - - - - - 37,999 37,999 - - - - - - - 2,624 180,440 183,064 - - - - - - - - 3,081,731 3,081,731 - - - - - - - - 2,179,942 2,499,959 - 88,235 - - - - - 1,657 25,364,460 29,750,686 - - - - - - - - 865,173 865,173

43,218 130,726 14,853 9,491 22,669 6,275,900 106 141,134 32,122,934 45,987,781

24,483 - - 1,054 2,591 18,738 - 2,871 164,154 482,574 - - - - - - - 2,528 115,430 119,476 - - - - - - - - 1,067,997 1,083,252 - - - - - - - - 46,207 46,232 - - - - - - - 1,410 - 1,410

- - - - - - - - 15,455,000 17,925,000 - - - - - - - - 7,395,000 7,440,326

24,483 - - 1,054 2,591 18,738 - 6,809 24,243,788 27,098,270

- 88,235 - - - - - 1,657 5,559,575 7,795,818

- - - - - - - - 3,081,731 3,081,731 18,735 42,491 14,853 8,437 20,078 6,257,162 106 132,668 (762,160) 8,011,962

18,735$ 130,726$ 14,853$ 8,437$ 20,078$ 6,257,162$ 106$ 134,325$ 7,879,146$ 18,889,511$

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City of Bay City, MichiganAll Component Units

Combining Statement of ActivitiesFor the Year Ended June 30, 2007

Program RevenuesOperating Capital

Charges Grants and Grants and Net (Expense)Functions / Programs Expenses for Services Contributions Contributions Revenue

Component unitsDowntown Development Authority 151,719$ 205,770$ -$ -$ 54,051$ Midland Street TIFA 103,728 - - - (103,728) Kresge's DDA 256 - - - (256) Marquette District TIFA 203,807 - - - (203,807) Water Street DDA 263,165 - - 779 (262,386) Marina Development TIFA 10,850 - - - (10,850) Allen Healthcare DDA 4,808 - - - (4,808) Research Center Development TIFA 24,483 - - - (24,483) Knepp's DDA 2,968 - - - (2,968) Brownfield Redevelopment - - - - - Columbus Avenue Management Board 6,372 7,600 996 - 2,224 Midland Street Management Board 15,461 19,000 - - 3,539 POWER 27,288 - - - (27,288) EDC - - - - - Downtown Management Board 252,648 57,984 80,996 - (113,668) Wenonah Park Properties 8,113,027 5,794,488 - - (2,318,539)

Total component units 9,180,580$ 6,084,842$ 81,992$ 779$ (3,012,967)$

continued…

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All Component UnitsCombining Statement of Activities (Concluded)


Allen Downtown Marquette Water Marina Health-

Development Midland St. Kresge's District Street Develop. careFunctions/Programs Authority TIFA DDA TIFA DDA TIFA DDA

Changes in net assetsNet (expense) revenue 54,051$ (103,728)$ (256)$ (203,807)$ (262,386)$ (10,850)$ (4,808)$ General revenues:

Property taxes - 103,963 1,670 429,307 304,608 - 19,588 Unrestricted investment earnings 4,291 15,557 2,545 83,804 54,984 10,273 502 Miscellaneous revenue 30,000 - - - - - -

Total general revenues 34,291 119,520 4,215 513,111 359,592 10,273 20,090

Change in net assets 88,342 15,792 3,959 309,304 97,206 (577) 15,282

Net assets, beginning of year, as restated 154,157 475,859 48,686 2,203,096 531,318 542,582 (59,063)

Net assets, end of year 242,499$ 491,651$ 52,645$ 2,512,400$ 628,524$ 542,005$ (43,781)$


City of Bay City, Michigan

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Research ColumbusCenter Brownfield Avenue Midland St. Downtown Wenonah

Develop. Knepp's Redevelopment Mgmt. Mgmt. Mgmt. Park TIFA DDA Authority Board Board P.O.W.E.R. EDC Board Properties Totals

(24,483)$ (2,968)$ -$ 2,224$ 3,539$ (27,288)$ -$ (113,668)$ (2,318,539)$ (3,012,967)$

16,797 15,299 9,082 - - - - 113,455 - 1,013,769 1,937 2,705 481 - - 128,051 6 2,770 151,482 459,388

- - - - - 250 - - 1,624 31,874

18,734 18,004 9,563 - - 128,301 6 116,225 153,106 1,505,031

(5,749) 15,036 9,563 2,224 3,539 101,013 6 2,557 (2,165,433) (1,507,936)

24,484 115,690 5,290 6,213 16,539 6,156,149 100 131,768 10,044,579 20,397,447

18,735$ 130,726$ 14,853$ 8,437$ 20,078$ 6,257,162$ 106$ 134,325$ 7,879,146$ 18,889,511$

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City of Bay City, Michigan Notes to the Financial Statements

June 30, 2007

Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies of the City of Bay City, Michigan (the “City”) conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The Governmental Accounting Standards Board is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The following is a summary of the significant accounting policies used by the City of Bay City:

A. Reporting Entity

The City of Bay City is a municipal corporation governed by an elected mayor and nine-member commission and administered by an appointed City Manager. As required by generally accepted accounting principles, these financial statements present the City and its component units-entities for which the City is considered to be financially accountable.

The discrete component unit columns in the government-wide financial statements represent a total of the City’s discrete component units. They are reported in a separate column to emphasize that they are legally separate from the City.

The governing bodies of the Downtown Management Board (DMB), Midland Street Management Board, Columbus Avenue Management Board, P.O.W.E.R. Fund, Economic Development Corporation of the City of Bay City, Brownfield Redevelopment Authority, Wenonah Park Properties, all the Tax Increment Financing Authorities (TIFA’s), and Downtown Development Authorities (DDA’s), are all appointed by the City Commission or City Manager. These component units provide economic development and financing services to specific geographic areas within the City. These entities are fiscally dependent on the City because the City Commission is responsible for approving any debt issuances and the annual operating budgets of all component units except for Wenonah Park Properties and the Downtown Management Board. All discrete component units use governmental fund type accounting. However, full accrual accounting is used for financial statement presentation.

Complete financial statements for the DMB may be obtained at their administrative offices located at Commerce 1, 901 Saginaw Street, Bay City, MI 48708, and complete financial statements for Wenonah Park Properties may be obtained at City Hall located at 301 Washington Ave., Bay City, MI 48708. Separate financial statements for the Midland Street Management Board, Columbus Avenue Management Board, P.O.W.E.R. Fund, Economic Development Corporation of the City of Bay City, Brownfield Redevelopment Authority, TIFA’s and DDA’s are not prepared.

City of Bay City, Michigan Notes to the Financial Statements June 30, 2007

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Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

The City Manager is responsible for appointing members to the governing Board of the Bay City Housing Commission, but the City’s accountability for the organization does not extend beyond making the appointments. Accordingly, this related organization is not included in these financial statements.

B. Government-Wide and Fund Financial Statements

The government-wide financial statements (i.e., the statement of net assets and the statement of changes in net assets) report information on all of the nonfiduciary activities of the primary government and its discrete component units. For the most part, the effect of interfund activity has been eliminated from these statements. Governmental activities, normally supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable.

The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment; and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not included among program revenues are reported instead as general revenue.

Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.

C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements, except for agency funds which do not have a measurement focus. Revenue is recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenue in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.


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Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenue is recognized as soon as it is both measurable and available. Revenue is considered to be available if it is collected within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, expenditures relating to compensated absences, and claims and judgments are recorded only when payment is due.

Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenues of the current period. All other revenue items are considered to be measurable and available only when cash is received by the government.

The City reports the following major governmental funds:

The General Fund is the City’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund.

The Major Streets Fund is used to account for major streets maintenance funds received from the State of Michigan, as well as, property tax and other revenues used to maintain and reconstruct major streets within the City. The Rehabilitation Fund is used to account for revenues and expenditures related to providing financing to low and moderate income individuals to assist with home improvements within specific neighborhoods of the City.

The City reports the following major proprietary funds:

The Electric Fund is used to account for all activities relative to providing electric utility services to customers within Bay City and the surrounding townships.

The Water Fund is used to account for all activities relative to the maintenance and operation of the Water Distribution System and Water Treatment Plant. The Sewer Fund is used to account for all activities relative to the maintenance and operation of the City’s sanitary and combination sewers, the Wastewater Treatment Plant, and stormwater system.


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Additionally, the City reports the following fund types:

Internal Service Funds account for fleet; equipment purchases and maintenance; employee benefits; information systems; as well as self-insurance and risk management services provided to other departments of the City on a cost reimbursement basis.

The Pension Trust Funds account for the activities of the Police and Fire Employees’ Retirement System, which accumulates resources for pension benefit payments to qualified police and fire members. In addition, the City has two separate Health Care Investment Funds. The first fund accounts for non–public safety retirees and the second fund accounts for police & fire retirees. The purpose of these funds is to accumulate and invest funds to provide for the funding of health care benefits to retired employees of the City and their beneficiaries.

The Agency Funds account for assets held for other governments in an agency capacity, including tax collections and other project funds.

Private sector standards of accounting issued prior to December 1, 1989, are generally followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with the standards of the Governmental Accounting Standards Board. The City has elected not to follow private sector standards issued after November 30, 1989 for its business-type activities and enterprise funds.

As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the City’s enterprise functions and various other functions of the City. Eliminations of these charges would distort the direct costs and program revenues reported for the various functions concerned.

The City allocates indirect expenses primarily comprised of central governmental services to operating functions and programs benefiting from those services. Central services include City management, centralized budgetary formulation and oversight, accounting, financial reporting, payroll, procurement contracting and oversight, investing and cash management, personnel services, and other central administrative services. Allocations are charged to programs based on use of central services determined by various allocating methodologies. These charges are separately reported in the statement of activities. As a matter of policy, certain functions that use significant central services are not charged for the use of these services. These functions or programs include police, fire, and certain divisions within public services and parks.


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Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Amounts reported as program revenue include: (1) charges to customers or applicants for goods, services, or privileges provided; (2) operating grants and contributions; and (3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenue rather than as program revenue. Likewise, general revenue includes all taxes.

Proprietary Funds distinguish operating revenue and expenses from non-operating items. Operating revenue and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenue of the City’s proprietary funds relates to charges to customers for sales and services. The Water and Sewer Funds also recognize the portion of tap fees intended to recover current costs (e.g., labor and materials to connect new customers) as operating revenue. The portion intended to recover the cost of the infrastructure is recognized as non-operating revenue. Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenue and expenses not meeting this definition are reported as non operating revenue and expenses.

D. Assets, Liabilities, and Net Assets or Fund Equity

Bank Deposits and Investments – The government’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition.

The Pension Trust Fund is authorized by the State’s Pension Investment Act, as amended, to invest in common stocks, real estate, and various other investment instruments, subject to certain limitations.

Investments are reported at fair value. Investment fair values are predominantly determined using quoted market prices.


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Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

Receivables and Payables - In general, outstanding balances between funds are reported as “due to/from other funds”. Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as “advances to/from other funds.” Any residual balances outstanding between the governmental activities and the business-type activities are reported in the government-wide financial statements as “internal balances.”

During the course of operations numerous transactions occur between individual funds for goods provided or services rendered. These receivables and payables are classified as “due from other funds” or “due to other funds” on the governmental funds balance sheet.

Property Taxes – Property taxes are levied each July 1 and December 1 on the assessed valuation of property, as equalized by the State, as of the preceding December 31, the lien date. The levies are considered past due on September 15 and February 15, respectively, at which time applicable penalties and interest are assessed. The City bills and collects its own property taxes and also taxes for the various local governmental units. Collection and remittance for other units are accounted for in the Current Tax Collections Agency Fund. City property tax revenues are recognized when levied to the extent that they result in current receivables.

Inventories and Prepaid Items - Inventories are valued at cost, on a first-in, first-out basis. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Certain payments to vendors reflect costs applicable to future fiscal years and are recorded as prepaid items in both government-wide and fund financial statements.

Restricted Assets - The revenue bonds of the Enterprise Funds require amounts to be set aside for construction, debt service principal and interest, operations and maintenance, and a bond reserve. These amounts have been classified as restricted assets.

Capital Assets - Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities column in the government-wide financial statements. Capital assets are defined by the City as assets with an initial individual cost of more than $5,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Infrastructure is reported retrospectively from 1980, except for right-of-ways, bridges and traffic signals, which are required to be reported despite the date of purchase.


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Donated capital assets are recorded at estimated fair market value at the date of donation.

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized.

Capital assets of the primary government are depreciated using the straight line method over the following estimated useful lives:

ASSETS YEARS Buildings 50 Land Improvements 50 Machinery and Equipment 5 - 20 Vehicles 3 - 10

The estimated useful lives of infrastructure assets are as follows:

YEARS Site Improvements, Streets, Sidewalk, Curbs 20 Bridges 50

Compensated Absences (Vacation and Sick Leave) - It is the City’s policy to permit employees to accumulate earned but unused sick and vacation pay benefits. All vacation pay and sick leave are accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee resignations or retirements.

City employees earn vacation leave at rates ranging between 12 and 28 days per year depending on their union membership and length of service. All outstanding vacation is payable upon resignation, retirement, or death. Sick pay is accumulated by employees at rates ranging between 6.67 hours to one day per month of employment. Depending on the union contract, some employees earn one additional day if the employee does not use any sick leave days within a three-month period. Outstanding sick pay is payable only upon qualified retirement. The amount paid is one-half of the accumulated sick days ranging from 0 to a maximum of 160 days dependent upon the union contract under which the employee is covered. Employees with over 25 years of service (with the maximum 160 days of sick leave) receive 20 additional days of sick leave pay for each year of service in excess of 25 years but cannot exceed 80 additional days. The maximum number of days an employee may be compensated for cannot exceed 160 days.


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Long-Term Obligations - In the government-wide financial statements and the proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund-type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts are reported as other financing uses. Issuance costs are reported as debt service expenditures. Fund Equity - In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change.

Note 2 – STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Budgetary Information – Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental fund types, except capital project funds which are adopted on a project level. Individual amendments for the year were not material in relation to the original appropriations. Supplemental appropriations were made during the year. Unexpended appropriations lapse at year-end. Budget appropriations are prepared by the City Manager and authorized by the City Commission on a departmental basis in accordance with sections of the City Charter. Intradepartment budget transfers within the General Fund and budget transfers within all other funds can be approved by the City Manager. All budget amendments and transfers in excess of $4,500 within a General Fund Department and at the total fund level for all other funds must be approved by the City Commission. Therefore, legal budgetary control is exercised at the activity level for the General Fund and the total fund level for all other funds. The policy limits the aggregate amount of transfers to $4,500 per fiscal year within a General Fund Department and at the total fund level for all other funds without Commission approval. Encumbrances – Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is not employed by the City of Bay City because it is not, at present, considered necessary to assure effective budgetary control or to facilitate effective cash planning and control.


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Note 2 – STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY-CONTINUED

Excess of Expenditures Over Appropriations in Budgeted Funds – During the year, the City incurred expenditures that were in excess of the amounts budgeted, as follows:

Amended Budget Actual Variance

General Fund: General government:

Community Development $ 166,852 $ 193,604 $ (26,752)Assessor 443,318 446,661 (3,343)Payroll/Payables 178,269 182,333 (4,064)Meter Reading 408,803 420,151 (11,348)

Public safety: Safe Streets Task Force - 18,190 (18,190)Police Support 1,091,604 1,110,506 (18.902)Drive Michigan Safely - 16,918 (16,918)Police in-service training 32,500 33,774 (1,274)

Public works: Street Lighting 421,702 447,164 (25,462)

Capital outlay 175,025 217,881 (42,856)

Special Revenue Funds: Community Policing Fund 107,412 111,693 (4,281)Community Development Block Grant 1,189,633 1,380,984 (191,351)

Fund Deficits - The City has accumulated a fund deficit in the following component unit:

Allen Healthcare DDA component unit in the amount of $43,781. The development plan of this component unit states that the amount of tax increment revenues collected on an annual basis will be applied against its debt until it has been paid off. It is estimated that this will occur in fiscal year ending June 30, 2010.


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Note 3 - DEPOSITS AND INVESTMENTS

Michigan Compiled Laws, Section 129.91, authorizes local governmental units to make deposits and invest in the accounts of federally insured banks and credit unions that have offices in Michigan. The local unit is allowed to invest in bonds, securities, and other direct obligations of the United States or any agency or instrumentality of the United States; repurchase agreements; bankers’ acceptances of United States banks; commercial paper rated within the two highest classifications, which mature not more than 270 days after the date of purchase; obligations of the State of Michigan or its political subdivisions, which are rated as investment grade; and mutual funds composed of investment vehicles that are legal for direct investment by local units of government in Michigan. The breakdown between deposits and investments for the City is as follows:

Custodial Credit Risk – Deposits. For deposits, custodial credit risk is the risk that in the event of a bank failure, the City’s deposits may not be returned to the government. The City does not require collateralization of deposits. At June 30, 2007, the carrying value of deposits owned by the City was $10,781,651 and component units was $8,248,182. Approximately $600,000 of the City’s bank balance and $200,000 of the component unit bank balance was covered by federal depository insurance. The remaining balance of $20,859,293 was exposed to custodial credit risk because it was unsecured and uncollateralized. Custodial Credit Risk – Investments. Following is a summary of the City’s investments as of June 30, 2007:

Mutual Funds $ 19,959,227 Government securities 8,095,212 Agency obligations 29,693,166 Corporate bonds 2,925,872 Common stock 22,918,116 Total $ 83,591,593

Statement of Net Assets: Govern-

mental Business-

Type

Fiduciary Total

Primary

Component

Activities Activities Funds Government Units Total Cash and cash equivalents $13,303,229 $21,565,165 $ 2,949,912 $37,818,306 $ 5,166,451 $ 42,984,757 Investments - - 55,828,643 55,828,643 - 55,828,643 Restricted Assets __ - 726,295 - 726,295 3,081,731 3,808,026 Total $13,303,229 $22,291,460 $58,778,555 $94,373,244 $ 8,248,182 $102,621,426

Deposit and Investments:

Bank Deposits (checking, savings, and certificates of deposit) $ 19,029,833 Investments (securities, commercial paper, and money market accounts) 83,591,593 Total $102,621,426


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Note 3 - DEPOSITS AND INVESTMENTS – CONTINUED For investments, custodial credit risk is the risk that, in the event of the failure of the counterparty, the System will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City’s investment policy requires that investment securities be held in third-party safekeeping by a designated institution and that the safekeeping agent follow the procedure of delivery vs. payment. As of June 30, 2007, none of the City’s investments, excluding the money market accounts which are not subject to custodial credit risk, were exposed to risk since the securities are held in the City’s name by the counter party.

Interest Rate Risk. As of June 30, 2007, maturities of the City’s debt securities were as follows:

Investment Maturities (In Years) Credit Rating

Fair Value

Less

Than 1

1-5

6-10

More

Than 10

Moody’s Investor Services

Government obligations $ 8,095,212 $ 348,136 $ 3,380,998 $ 172,830 $4,193,248 AAA

Agency obligations 25,687,956 1,996,250 22,852,850 - 838,856 AAA

Corporate bonds 215,530 - 48,374 137,699 29,457 A1 Corporate bonds 165,719 - 59,147 69,086 37,486 A2 Corporate bonds 217,513 - 115,777 101,736 - AA2 Corporate bonds 262,701 - 142,668 120,033 - AA3 Corporate bonds 850,297 - 333,767 370,160 146,370 AAA Corporate bonds 191,136 - 59,248 131,888 - B1 Corporate bonds 110,137 - 20,400 89,737 - B2 Corporate bonds 126,831 - 51,500 75,331 - B3 Corporate bonds 127,806 - 15,656 48,641 63,509 BA1 Corporate bonds 149,650 - 24,000 125,650 - BA2 Corporate bonds 97,950 - - 97,950 - BA3 Corporate bonds 72,228 - - - 72,228 BAA1 Corporate bonds 150,973 - - 117,511 33,462 BAA2 Corporate bonds 160,963 - 24,677 136,286 - BAA3 Corporate bonds 26,438 - - 26,438 - CAA1 FNMA 214,267 30,000 - 71,579 112,688 AAA FNMA passthroughs 3,790,943 - - - 3,790,943 AAA

$40,714,250 $2,374,386 $27,129,062 $1,892,555 $9,318,247

To the extent possible, the City attempts to match its investments with anticipated cash flow requirements. Short-term funds matched to a specific cash flow requirement shall be invested in securities maturing not more than two (2) years from the date of purchase. Long-term funds (capital, debt services, etc.) matched to a specific cash flow requirement may be invested in securities maturing not more than five (5) years from the date of purchase.


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Note 3 - DEPOSITS AND INVESTMENTS – CONTINUED The City’s investment policy and the Police & Fire Retirement System’s investment policy do not have specific limits on maturities of debt securities as a means of managing its exposure to fair value losses arising from increasing interest rate. Credit Risk. State law limits investments to specific governmental securities, certificates of deposits and bank accounts with qualified financial institutions, commercial paper with specific maximum maturities and ratings when purchased, bankers acceptances of specific financial institutions, qualified mutual funds and qualified external investment pools as identified in the list of authorized investments in the summary of significant accounting policies. The City’s investment policy does not have specific limits in excess of state law on investment credit risk. Credit risk ratings, where applicable, have been identified above for the City’s investments. The Police & Fire Retirement System’s investment policy on credit risk for allowable debt securities follows. The credit rating for each investment type is identified in the above table for debt securities held at June 30, 2007. Regarding Core Plus Fixed Income, the System’s investment policy allows its investments managers to invest up to 12.5% of the portfolio in non-investment grade securities (BB to CC rated), with at least 80% of the non-investment grade portfolio consisting of BB or B rated securities. The policy also allows investment managers to invest up to 10% of the portfolio in non-U.S. dollar denominated fixed income securities. The minimum credit rating for international fixed income securities is single B at the time of purchase.

Concentration of Credit Risk. At June 30, 2007, the investment portfolio was concentrated as follows:

Investment Type

Issuer

% of Portfolio

Amount

U.S. agencies Federal National Mortgage Association 8.4% $ 4,384,978 The City diversifies its investment portfolio by security type and institution to eliminate potential losses. Individual securities having potential risks shall be limited in size so that default will not exceed the annual income generated from the remainder of the portfolio. The Police & Fire Retirement System’s investments policy limits maturity value that may be invested in American Depository Receipts to 15% of each equity portfolio. In addition, the System’s investment policy limits maturity value that may be invested in U.S. Equities to 5% of the outstanding securities of one issuer.


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Note 4 – ACCOUNTS RECEIVABLE AND ALLOWANCES FOR UNCOLLECTIBLES Receivables in the primary government and component units are as follows:

Governmental

Activities

Business-type

Activities Component

Units

Total Receivables: Accounts $ 689,994 $ 6,842,294 $ 711,087 $ 8,243,375 Taxes 266,464 181,467 6,670 454,601 Interest 96,027 177,723 23,248 296,998 Intergovernmental 1,257,621 4,866 80,159 1,342,646 Notes 7,176,032 - 4,000,000 11,176,032 Gross Receivables 9,486,138 7,206,350 4,821,164 21,513,652 Less: Allowance for Uncollectibles (164,432)

(327,398) (418,446) (910,276)

Net total receivables $ 9,321,706 $ 6,878,952 $ 4,402,718 $ 20,603,376

The only receivables not expected to be collected within one year are approximately $7 million and $4 million of the notes receivable reported in the Rehabilitation fund and P.O.W.E.R. Fund component unit, respectively. Governmental funds report deferred revenue in connection with receivables for revenue that is not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received but not yet earned. At the end of the current fiscal year, the various components of deferred revenue are as follows:

Unavailable Unearned Notes and accounts receivable from homeowners expected to be collected over several years $ 7,180,532 $ - Special assessments (non-current portion) 59,481 - Delinquent personal property taxes receivable 115,086 - Grant and categorical aid payment received prior to meeting all eligibility requirements - 205,608

Total $ 7,355,099 $ 205,608


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Note 5 - CAPITAL ASSETS

Capital asset activity of the City’s governmental activities for the year ended June 30, 2007 was as follows:

Governmental Activities Balance

July 1, 2006 Additions

Disposals and

Adjustments Balance

June 30, 2007 Capital assets not being depreciated:

Land $ 18,597,840 $ - $ (1,058,769) $ 17,539,071 Construction in progress 199,850 139,897 (129,482) 210,265 Other intangible assets 376,000 - - 376,000

Subtotal 19,173,690 139,897 (1,188,251) 18,125,336

Capital assets being depreciated: Roads and sidewalks 121,998,102 2,766,949 - 124,765,051 Buildings and improvements 6,377,010 274,370 - 6,651,380 Vehicles 11,805,676 1,164,711 (662,020) 12,308,367 Office furnishings 39,293 - - 39,293 Other tools and equipment 3,263,427 252,014 (124,508) 3,390,933

Subtotal 143,483,508 4,458,044 (786,528) 147,155,024 Accumulated depreciation:

Roads and sidewalks (70,925,567) (3,128,288) - (74,053,855) Buildings and improvements (3,409,651) (194,129) - (3,603,780) Vehicles (6,452,055) (929,968) 636,643 (6,745,380) Office furnishings (11,841) (1,965) - (13,806) Other tools and equipment (2,107,390) (335,088) 123,000 (2,319,478)

Subtotal (82,906,504) (4,589,438) 759,643 (86,736,299) Net capital assets being depreciated 60,577,004 (131,394) (26,885) 60,418,725 Governmental activities

capital assets, net $ 79,750,694 $ 8,503 $ (1,215,136) $ 78,544,061


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Note 5 - CAPITAL ASSETS - CONTINUED

Capital asset activity of the City’s business-type activities for the year ended June 30, 2007 was as follows:

Business-type Activities Balance

July 1, 2006 Additions Disposals and Adjustments

Balance June 30, 2007

Capital assets not being depreciated: Land $ 821,424 $ - $ - $ 821,424 Construction in progress - 56,973 - 56,973 Other 95,421 - - 95,421

Subtotal 916,845 56,973 - 973,818 Capital assets being depreciated:

Utility plant and systems 257,981,921 3,608,286 (384,589) 261,205,618 Land Improvements 18,982,758 1,747,954 (64,000) 20,666,712 Buildings and improvements 3,639,597 19,944 - 3,659,541 Machinery and equipment 6,029,126 336,771 - 6,365,897

Subtotal 286,633,402 5,712,955 (448,589) 291,897,768 Accumulated depreciation:

Utility plant and systems (124,156,660) (6,806,898) 384,589 (130,578,969) Land improvements (2,307,761) (443,489) 64,000 (2,687,250) Buildings and improvements (2,060,493) (76,272) - (2,136,765) Machinery and equipment (3,366,271) (271,944) - (3,638,215)

Subtotal (131,891,185) (7,598,603) 448,589 (139,041,199) Net capital assets being depreciated 154,742,217 (1,885,648) - 152,856,569 Business-type Activities

capital assets, net $ 155,659,062 $(1,828,675) $ - $ 153,830,387


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Note 5 - CAPITAL ASSETS - CONTINUED

Capital asset activity of the City’s component units for the year ended June 30, 2007 was as follows:

Component Units Balance

July 1, 2006 Additions

Disposal and Adjustments

Balance June 30, 2007

Capital assets not being depreciated: Land $ 2,170,136 $ 24,000 $ - $ 2,194,136 Construction in progress 121,675 264,824 (80,676) 305,823

Subtotal 2,291,811 288,824 (80,676) 2,499,959 Capital assets being depreciated:

Buildings 21,557,063 - - 21,557,063 Infrastructure 7,045,108 554,589 - 7,599,697 Furniture and equipment 4,559,926 42,587 - 4,602,513 Vehicles 31,326 - - 31,326

Subtotal 33,193,423 597,176 - 33,790,599 Accumulated depreciation:

Buildings (703,689) (432,501) - (1,136,190) Infrastructure (1,317,088) (248,628) - (1,565,716) Furniture and equipment (809,489) (512,333) - (1,321,822) Vehicles (9,920) (6,265) - (16,185)

Subtotal (2,840,186) (1,199,727) - (4,039,913) Net capital assets being depreciated 30,353,237 (620,551) - 29,750,686 Component Units

capital assets, net $ 32,645,048 $ (313,727) $ (80,676) $ 32,250,645 Depreciation expense was charged to the programs of the primary government as follows:

Governmental activities: General government $ 38,089 Public safety 290,601 Public works 3,005,716 Recreation and culture 214,741 Community & Economic Development 103,328 Internal Service Fund depreciation is charged to the

various function based on their usage of the asset 936,962

Total governmental activities $ 4,589,437

Business-type activities: Electric 2,164,783 Water 1,349,969 Sewer 3,931,703 Other enterprise funds 152,148

Total business-type activities $ 7,598,603


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Note 6 - INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS Outstanding balances between funds are reported in the fund financial statements as “due to/from other funds”. These amounts result from short-term lending from one fund to another. Any residual balances outstanding between the governmental activities and business-type activities are reported in the governmental-wide financial statements as “internal balances”.

The composition of interfund balances is as follows: Interfund Transfers: Transfers are used to move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them; or to use unrestricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. The composition of interfund transfers is as follows:

General Fund

Rehab- ilitation Fund

Nonmajor Govern- mental Funds

Electric Fund

Total

Transfers to: Rehabilitation Fund $ - $ - $ 266,585 $ - $ 266,585 Major Streets Fund - - 35,521 40,000 75,521 Nonmajor Governmental Funds 89,155 224,799 125,000 60,000 498,954 Electric Fund - - 111,810 - 111,810 Nonmajor Enterprise Funds 137,084 - - - 137,084

Total $ 226,239 $ 224,799 $ 538,916 $ 100,000 $ 1,089,954

General

Fund

Rehab- .ilitation

Fund

Major Street Fund

Nonmajor Govern- mental Funds

Sewer Fund

Water Fund

Nonmajor Enterprise

Funds

Internal Service Funds

Total General Fund $ - $ - $ 5,063 $ 2,403 $ - $ - $ 399 $ 42,278 $ 50,143Rehabilitation Fund 20,231 - - 2,050 - - - - 22,281Major Street Fund 113,336 - - 214,416 - - - 4,097 331,849Nonmajor Governmental Funds 130,167 2,050 - - - - 62,204 4,361 198,782Electric Fund - - - - 4,726 7,692 - 28,677 41,095Sewer Fund - - 233,121 - - - - 17,616 250,737Water Fund 124,564 - 21,642 - - - - 17,754 163,960Nonmajor Enterprise Funds 4,873 - - - - - - - 4,873Internal Service Funds - - - - - - - 347,838 347,838

Total $393,171 $ 2,050 $259,826 $218,869 $ 4,726 $ 7,692 $ 62,603 $462,621 $ 1,411,558


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Note 7 – CAPITAL LEASES

The City of Bay City has entered into two separate lease agreements as lessee of a copier with Xerox, and a mail-stuffing machine with Pitney Bowes. The original amount of the copier was $29,235 and the original amount of the mail-stuffing machine was $38,100. The remaining balances are $18,272 for the copier and $4,445 for the mail-stuffing machine. Annual lease payments required under the capital leases are as follows:

Fiscal Year General End Fund 2008 $ 11,7542009 7,3092010 3,654

Total minimum payments due 22,717Less interest -Present value of net minimum leases $ 22,717

Note 8 – LONG-TERM DEBT

The City issues bonds to provide for the acquisition and construction of major capital facilities. General obligation bonds are direct obligations and pledge the full faith and credit of the City. City contractual agreements and installment purchase agreements are also general obligations of the government. Revenue bonds involve a pledge of specific income derived from the acquired or constructed assets to pay debt service.

Long-term debt obligation activity can be summarized as follows:

Governmental Activities:

6.4% to 7.15% Street Improvement Capital Appreciation G.O. bonds dated 7/2/91, aggregate principal due at maturity beginning 6/1/99 through 6/1/21.

Capital Lease due in installments through 2010.



Purchase Agreement due in installments, including interest, through 2013. Originated in Motor Equipment Revolving Internal Service Fund.

Employee compensated absences.

Total Governmental Activities

Balance 7/01/06

$ 17,774,130

25,581

7,718

12,065

323,144

2,782,631

$ 20,925,269

Additions (Reductions)

$ 1,283,447 (1,595,000)

(7,309)

(7,718)

(7,620)

(41,104)

1,176,736 (886,513)

$ (85,081)

Balance 6/30/07

$ 17,462,577

18,272

-

4,445

282,040

3,072,854 $ 20,840,188

Due-Within One-Year

$ 1,615,000

7,309

-

4,445

42,685

1,095,614

$ 2,765,053


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Note 8 – LONG-TERM DEBT - CONTINUED

Business-Type Activities:

Sewer Fund 4.9% to 5.6% G.O. Sewage Disposal System Improvement Bonds, Series 1999, principal due in annual installments of $45,000 to $120,000 through 4/1/20, interest due semi-annually April 1 and October 1.

2.0% to 3.75% G.O. Sewage System Improvement Refunding Bonds, principal due in annual installments through 9/1/12, interest payable semi-annually March 1 and September 1. 2.5% State Revolving Fund Loan issued March 29, 2001, principal due in annual installments beginning 4/01/04 through 4/01/23, interest due semi-annually April 1 and October 1. 2.5% to 3.5% G.O. Sanitary Sewage System Bonds, Series 2004, principal due in annual installments of $525,000 to $690,000 through 10/1/14, interest due semi-annually April 1 and October 1. 3.5% to 4.25% G.O. Sanitary Sewage System Bonds, Series 2005, principal due in annual installments of $200,000 to $430,000 through 10/1/25, interest due semi-annually April1 and October 1.

Balance 7/01/06

$ 1,195,000

3,225,000

37,325,000

5,475,000

6,000,000


$ (60,000)

(405,000)

(1,790,000)

(540,000)

(200,000)

Balance 6/30/07

$ 1,135,000

2,820,000

35,535,000

4,935,000

5,800,000

Due-Within One-Year

$ 65,000

425,000

1,835,000

550,000

210,000

Electric Fund 5.0% to 5.5% Electric Utility System Revenue Refunding Bonds, 1997 Series, principal due in annual installments of $925,000 to $1,585,000 through 1/1/12, interest due semi-annually January 1 and July 1. Payment net of amortization of $67,221.

8,315,000

(1,200,000)

7,115,000

1,270,000


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Note 8 – LONG-TERM DEBT - CONTINUED

Business-Type Activities: Water Fund

2.125% Michigan State Revolving Fund loan issued June 23, 2005, principal due in annual installments of $245,000 to $365,000 beginning 4/1/07 through 4/1/26, interest due semi-annually April 1 and October 1.

Balance 7/01/06

$ 4,650,727


$ 1,349,273

(245,000)

Balance 6/30/07

$ 5,755,000

Due-Within One-Year

$ 250,000 Other

Employee Compensated Absences

1,277,921

1,006,537 (489,288)

1,795,170 597,299

Total $67,463,648 $ (2,573,478) $ 64,890,170 $ 5,202,299 The aggregate debt service requirements to pay principal and interest on the various bonds and loans outstanding with interest of $14,359,054 in the business-type activities, interest of $24,043,759 including capital appreciation of $11,749,868 in the governmental activities bonded debt, and interest of $36,130 in governmental activities other debt are as follows:

Governmental Business Type Activities Activities

Fiscal Year End

Bonded Debt Principal Interest

Other Debt Principal Interest

Principal Interest

2008 $ 500,279 $ 1,114,721 $ 54,439 $ 10,343 $ 4,605,000 1,883,5052009 468,509 1,166,491 51,637 8,701 4,760,000 1,727,3572010 443,618 1,216,382 49,686 6,996 4,945,000 1,561,4602011 418,706 1,261,294 47,803 5,225 5,125,000 1,383,8242012 392,320 1,312,680 49,641 3,387 5,335,000 1,194,035

2013 – 2017 2,165,968 9,442,765 51,551 1,478 16,690,000 4,235,3272018 – 2022 1,323,309 8,529,426 - - 15,950,000 2,090,1012023 – 2027 - - - - 5,685,000 283,445

Total $ 5,712,709 $ 24,043,759 $ 304,757 $ 36,130 $ 63,095,000 $14,359,054


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Note 8 - LONG-TERM DEBT – CONTINUED

Component Units:

8.0% Allen HealthCare DDA note payable to developer, due in annual installments equal to the annual captured increment until the original note of $150,331 plus interest is paid in full.

2.5% to 4.05% Downtown Development and Refunding Bonds, Series 2004, principal due in annual installments of $20,000 to $375,000 through 5/1/18, interest due semi-annually May 1 and November 1. 4.0% Wenonah Park Properties note payable to P.O.W.E.R. EDC Component Unit, interest payable monthly, principal balance due February 20, 2016. 7.5% to 7.875% Wenonah Park Properties Revenue Bonds 2002 Series, principal due annually 2009 through 2033, interest due semi-annually. Variable Rate Wenonah Park Properties HUD Section 108 Note payable, principal due annually, interest due quarterly. 4.0% Wenonah Park Properties note payable to Great Lakes Center Foundation. Maturity date February 2016. 0.0% Michigan Urban Land Assembly Promissory Note, principal payments beginning September 1, 2006 through September 1, 2011. Total Long-Term Debt-Component Units

Balance 7/01/06

$ 60,105

2,605,000

4,000,000

15,455,000

2,500,000

640,000

255,000

$ 25,515,105


$ (14,779)

(135,000)

-

-

-

-

-

$ (149,779)

Balance 6/30/07

$ 45,326

2,470,000

4,000,000

15,455,000

2,500,000

640,000

255,000

$ 25,365,326

Due Within One-Year

$ 16,549

140,000

-

-

-

-

42,500

$ 199,049


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Note 8 - LONG-TERM DEBT – CONTINUED

The aggregate debt service requirement for the component units to pay principal and interest on the various outstanding loans with interest included of $28,902,874 are as follows:

Component Units Fiscal Year End Principal Interest

2008 $ 199,049 $ 1,684,9312009 210,978 1,679,5492010 257,799 1,673,3482011 450,000 1,659,7902012 447,500 1,640,937

2013-2017 7,710,000 7,624,7292018-2022 3,335,000 5,429,6692023-2027 3,505,000 4,260,1712028-2032 5,255,000 2,752,875

2033 3,995,000 496,875Total $ 25,365,326 $ 28,902,874

Note 9 - RISK MANAGEMENT

The City is exposed to various risks of loss related to claims, theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City is self-funded for Liability and Property Insurance, Health and Dental Insurance, and Workers’ Compensation.

Liability and Property Insurance The self-insurance program for liability and property is accounted for in the Liability/Property Self-Insurance Fund (an internal service fund). Presently, the City insures the first $1,000 on property and 10% of the remaining claim up to $100,000 of loss and the first $250,000 for all other claims. The City maintains stop-loss coverage on the excess (up to $15,000,000) with an external risk management pool. There were no reductions of insurance coverage from the prior year. For the past several years, the City has engaged special legal counsel to assist in the review of liability and property insurance. This review is to ensure adequate coverage and comprehensive pricing. All funds of the City participate in this program and make payments based on estimates of the amounts needed to pay prior year and current year claims and to establish a reserve for losses relating to catastrophes.

Losses, damages, and administrative expenses are all paid from this fund. The claim liability for known claims and incurred but not reported claims is estimated by management and the insurance administrators. Settled claims have not exceeded insurance coverage in any of the past three years.


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Note 9 - RISK MANAGEMENT – CONTINUED

The changes in the claims liability for the years ended June 30, 2006 and 2007 are as follows:

Current Year Beginning Claims and End Fiscal of Period Changes in Claim of Period Year Liability Estimates Payments Liability 2006 $ 501,612 $ 1,201,124 $ (1,087,613) $ 615,123 2007 615,123 1,096,565 (856,655) 855,033

Health and Dental Insurance The self-insurance program for health and dental insurance is accounted for as part of the Benefits Program (an internal service fund). An independent administrator (Blue Cross) is hired to process the daily claims. The City is responsible for individual claims up to $125,000 and Blue Cross is responsible for paying claims above this amount up to $5,000,000. There were no reductions of insurance coverage from the prior year. The City is also responsible for paying administrative charges. The revenues for this Fund’s operation are reimbursements from various funds and employee payroll withholdings. The liability at the end of the year is based on claims already incurred and reported as provided by Blue Cross and on estimates of incurred but not reported claims as estimated by management. Settled claims have not exceeded insurance coverage in any of the past three years. The changes in the claims liability for the years ended June 30, 2006 and 2007 are as follows:

Current Year Beginning Claims and End Fiscal of Period Changes in Claim of Period Year Liability Estimates Payments Liability 2006 $ 470,296 $ 7,137,234 $ (7,104,024) $ 503,506 2007 503,506 7,132,972 (7,107,749) 528,729

Workers’ Compensation The self-insurance program for workers’ compensation is accounted for within the Benefits Program (an internal service fund). An independent administrator is hired to process the daily claims and to perform auditing and management duties. Presently, the City is responsible for individual claims up to $350,000 for each occurrence. The City maintains stop-loss coverage on the excess (up to $1,000,000) through a reinsurance policy. All funds of the City participate in this program and make payments based on estimates of the amounts needed to pay prior year and current year claims and to establish a reserve for losses relating to catastrophes. The liability at the end of the year is based on claims already incurred and reported as provided by the administrator and on estimates of incurred but not reported claims as estimated by management. Settled claims have not exceeded insurance coverage in any of the past three years.


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Note 9 - RISK MANAGEMENT – CONTINUED

Workers’ Compensation-continued The changes in the claims liability for the years ended June 30, 2006 and 2007 are as follows:

Current Year Beginning Claims and End Fiscal of Period Changes in Claim of Period Year Liability Estimates Payments Liability 2006 $ 551,258 $ 86,463 $ (294,308) $ 343,413 2007 343,413 458,750 (384,094) 418,069

Note 10 - DEFINED BENEFIT PENSION PLAN AND POST RETIREMENT BENEFITS

Employees’ Pension Plans Defined Benefit Pension Plan Plan Description - The City’s defined benefit pension plan provides retirement and disability benefits, and death benefits to plan members and beneficiaries. The City participates in the Municipal Employees Retirement System of Michigan (MERS), an agent multiple-employer plan administered by the MERS Retirement Board. Act No. 427 of the Public Acts of 1984, as amended, establishes and amends the benefit provisions of the participants in MERS. The Municipal Employees Retirement System of Michigan issues a publicly available financial report that includes financial statements and required supplementary information for MERS. That report may be obtained by writing to the Municipal Employees Retirement System of Michigan, 1134 Municipal Way, Lansing, Michigan 48917 or by calling (800) 767-6377.

Funding Policy - The City is required to contribute at an actuarially determined rate; the current rate contributed on annual covered payroll ranges from 0.0% to 72.51% depending on employee group. Employees are required to contribute 0.0% to 3.0%. The contribution requirements of the City are established and may be amended by the Retirement Board of MERS. The contribution requirements of plan members, if any, are established and may be amended by the City, depending on the MERS contribution program adopted by the City. Annual Pension Cost - For the year ended June 30, 2007, the City’s annual pension cost of $3,644,351 for MERS included the City’s required contribution of $2,062,980 and an additional contribution of $1,581,371. The required contribution was determined as part of the December 31, 2004 actuarial valuation using the entry age actuarial cost method. The actuarial assumptions included (a) a rate of return on the investment of present and future assets of 8.0%, (b) projected salary increases of 4.5% per year compounded annually, attributable to inflation, and (c) additional projected salary increase of 4.50% to 12.90% per year, depending on age, attributable to seniority/merit. The actuarial value of MERS assets was determined on the basis of a valuation method that assumes the fund earns the expected rate of return, and includes an adjustment to


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Note 10 - DEFINED BENEFIT PENSION PLAN AND POST RETIREMENT BENEFITS - CONTINUED

reflect fair value. The City’s unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on an open basis. The remaining amortization period at December 31, 2006, the date of the latest actuarial valuation, was 20 years.

Fiscal Year

Ending

Annual Pension

Cost (APC)

Annual Required

Contribution (ARC)

Percentage

of ARC Contributed

Net Pension Obligation

(Asset) 6/30/05 $ 1,883,724 $ 1,883,724 100.0% - 6/30/06 1,741,361 1,741,361 100.0% - 6/30/07 3,644,351 2,062,980 176.6% (1,581,371)

Actuarial Actuarial Accrued Unfunded UAAL as a

Actuarial Value of Liability (AAL) AAL Funded Covered Percentage of Valuation Assets Entry Age (UAAL) Ratio Payroll Covered Payroll

Date ( a ) ( b ) ( b-a ) ( a/b ) ( c ) ( (b-a)/c ) 12/31/04 $ 37,318,395 $ 61,535,480 $ 24,217,085 61% $ 6,322,611 383% 12/31/05 37,180,546 62,785,985 25,605,439 59% 6,206,879 413% 12/31/06 38,615,076 63,733,652 25,118,576 61% 5,508,803 456%

Police Officers and Firefighters Description - The City has provided a single-employer defined benefit pension plan for all eligible police officers and firefighters, which assets are included in the Bay City Police and Fire Retirement System, administered by the City. The System operates under the authority of the City Charter. The City Commission has the authority to amend and establish benefit provisions.

The City issues a publicly available financial report that includes financial statements and required supplementary information for the System. That report may be obtained by writing to the City of Bay City, 301 Washington Ave., Bay City, MI 48708.

All certified police officers and firefighters are eligible to participate in the System. All participants who retire at age 55 with 10 years of service or with 25 years of service regardless of age are entitled to a regular retirement benefit, payable monthly, of total service times 2.5% (for eligible employees retiring with less than 25 years of credited service) or 2.8% (for eligible employees retiring with 25 years or more of credited service) of the final average salary. The final average salary is determined as the highest 3 consecutive years of the last 10 years of average monthly pay. The plan also provides death and disability benefits.


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Note 10 - DEFINED BENEFIT PENSION PLAN AND POST RETIREMENT BENEFITS - CONTINUED

Basis of Accounting – The financial statements of the Bay City Police and Fire Retirement System are prepared on the accrual basis of accounting. Plan member contributions are recognized in the period they are due. The City’s contributions to the System are recognized when due and they have made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of the System.

Valuation of Investments - Marketable securities are stated at aggregate fair value. Securities which are traded on a national securities exchange are valued at the last reported sales price on the last business day of the System’s year. Investments traded in the over-the-counter market and listed securities for which no sale was reported on that date are valued at the last reported bid price. The difference between aggregate fair value and the cost of investments along with realized gains and losses on the sale of investments are reflected in the Statement of Changes in Plan Net Assets as part of investment income. Funding Policy - All plan members are required to contribute 8% of their annual salary to the System. The City is required to contribute the remaining amounts necessary to fund the System, based upon actuarial valuations as required by State statute. The current combined rate is 26.08% of covered payroll. Contributions are established and may be amended by the City Commission. For the year ended June 30, 2007, the City’s annual pension cost of $2,123,900 for the Police and Fire Retirement System included the City’s required contribution of $1,635,150 and an additional contribution of $488,750. The annual required contribution for the current year was determined as part of the annual actuarial valuation of the plan as of June 30, 2005 using the individual attained age normal cost actuarial cost method. The actuarial assumptions included (a) a 7.5% investment rate of return (net of administrative expenses) and (b) projected salary increases ranging from 6% to 49% per year. Both (a) and (b) included an inflation component of 5%. The assumptions included cost-of-living adjustments ranging from 4.0% to 5.0% after 5, 10, and 15 years payable to certain eligible members. The actuarial value of assets was determined using techniques that smooth the effects of short-term volatility in the fair value of investments over a five-year period. The unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on a closed basis. The amortization period at June 30, 2006, the date of the latest actuarial valuation, was 30 years for all groups. The City Commission has the authority to amend and establish benefit provisions, as well as contribution rates. Concentrations As of June 30, 2007, there were no investments with a fair value that represents 5% or more of the System’s net assets. However, amounts invested in a separate mutual fund represent 23% of the System’s total assets at June 30, 2007.


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Note 10 - DEFINED BENEFIT PENSION PLAN AND POST RETIREMENT BENEFITS – CONTINUED

Trend Information Trend information gives an indication of the System’s progress in accumulating sufficient assets to pay benefits when due. Selected three-year trend information is presented as follows:

Annual Net

Fiscal Year

Annual Pension

Cost (APC)

Required Contribution

(ARC)

Percentage of ARC

Contributed

Pension Obligation

(Asset) 6/30/05 $ 820,504 $ 801,487 100% -6/30/06 1,516,565 1,516,565 100% -6/30/07 2,123,900 1,635,150 130% (488,750)

Defined Contribution Pension Plan The City of Bay City Employees Defined Contribution Pension Plan is a single employer defined contribution pension plan created by the City and administered by the ICMA Retirement Corporation. The City is responsible for establishing and amending all provisions of the Plan. All City employees with the exception of police officers and firefighters hired after September 1, 1997 are required to participate. A defined contribution pension plan provides pension benefits in return for services rendered, an individual account for each participant and specifies how contributions to the individual’s account are to be determined instead of specifying the amount of benefits the individual is to receive. Under the defined contribution pension plan, the benefits a participant will receive depend solely on the amount contributed to the participant’s account. All returns earned on investments of these contributions are allocated to such participant’s account. The contribution requirements of the City are established and may be amended by the City Commission. Currently, there are two plans available to the employees. Plan A offers the employee the option of contributing 0.0% and requires a 5.0% contribution by the City. There is immediate vesting with Plan A. Plan B allows the employee to contribute 3.0% while the City contributes 8.5%. With Plan B, the employee is 50.0% vested after two years and 100.0% vested after four years. For the fiscal year ended June 30, 2007, the City’s required and actual contributions amounted to $555,586. Employees made contributions amounting to $211,083. Postretirement Healthcare As authorized by the City Commission, the City has elected to provide post-retirement healthcare benefits to certain retirees and their beneficiaries. Substantially all of the City’s employees become eligible for post-retirement health care benefits if they reach normal retirement age and are eligible for retirement benefits from the City. Currently, 416 retirees are eligible to receive benefits. The City pays the full cost of coverage for these benefits. The cost of retiree health care benefits is recognized as an expense as claims are paid. Retirees are currently not required to contribute. The amount of those costs for the year ended June 30, 2007, was $3,552,152.


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Note 11 – COMMITMENTS AND CONTINGENT LIABILITIES

Environmental Various properties owned by the City are subject to environmental clean-up. The sites include property at the northwest corner of Water Street and Lafayette Avenue, underground fuel storage tanks at the City Service Building (DPW garage), the former Surath scrap yard, which was acquired by condemnation of the construction of Liberty Bridge, the former Bay Aggregates/Industrial Brownhoist property (commonly referred to as Uptown at RiversEdge), Water Street Substation (formerly Consumers Energy), Middlegrounds Landfill, Dwan property, which was acquired on 1997 through Community Foundation and Natural Resources Trust Fund proceeds, and the former ProTow property on Morton Street, which was acquired in March 2002. On August 20, 2007, the City approved a five year option with a non profit corporation, RiversEdge Development Corporation, for approximately forty acres of former Bay Aggregates/Industrial Brownhoist property. The City has representation on the RiversEdge Corporation. Additionally, the City approved a two year option with Tall Ship Celebration: Bay City, a Michigan non profit corporation, for the construction of a Maritime Heritage Center. Both option agreements require the end-users to address the environmental issues in accordance with applicable law. The City may elect to assist through grants, tax financing capture, or other funding sources. Also, the City recently invested $22,000 for Due Care activities on the Dwan property (fencing and signage). The City has incurred approximately $600,000 in the clean up and remediation of the former Surath scrap yard. It is anticipated that a portion of these costs will be recovered from the sale proceeds. The City has spent approximately $1,500,000 to date to improve the Middlegrounds Landfill. It is anticipated that significant additional costs will be incurred in the clean-up. Such costs will not be known until the conclusion of the consultant’s studies and evaluation. The City believes that it has identified a number of specific parties which will share the majority of the ultimate costs and the City will not be liable for any clean-up costs above those amounts already expended. Additionally, the City has received funding from the Michigan Department of Environmental Quality Municipal Landfill Cost Sharing Grant in the amount of $875,000, which is dedicated to reimburse General Motors Corporation, a principal responsible party, who is coordinating remedial clean-up.


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Note 11 – COMMITMENTS AND CONTINGENT LIABILITIES – CONTINUED

Commitments The Electric Department, along with other Michigan municipal utilities, is a member of the Michigan Public Power Agency (MPPA). The agency was formed to acquire interests in certain electric generating plants and related transmission lines. MPPA has acquired a 4.8% undivided interest in the Consumers Power Campbell 3 plant and 18.61% undivided interest in the Detroit Edison Company Belle River project. The Electric Department has entered into power supply and project support contracts with MPPA. Under the agreement, the Electric Department will purchase 13.18% of the energy generated by the Campbell 3 plant and 3.71% of the energy generated by the Belle River plant. Under the terms of the contract, the Electric Department must make annual payments to cover their share of annual debt service requirements and fixed operation costs of the Campbell 3 and Belle River projects. The estimated annual debt payments with interest included of $3,361,363 are as follows:

Fiscal Year Campbell Belle River Ending Project Project 2008 $ 429,081 $ 1,129,399 2009 428,967 1,129,196 2010 - 1,129,286 2011 - 1,129,150 2012 - 1,129,255

2013-2019 - 8,279,937 $ 858,048 $ 13,926,223

Construction Commitment The City entered into a construction commitment for various projects associated with our sewer system retention basins in the amount of $358,000. As of June 30, 2007, $29,500 was expended and $328,500 remains on the construction commitment with the contractor.

Subsequent Event On November 19, 2007, the City Commission amended the Code of Ordinances to repeal the section which established and governed the POWER Fund. The POWER Fund was created as a revolving loan fund to help promote and assist economic development and increase demand for electrical services in the City. Of the remaining funds, approximately $2.1 million will be used for electrical infrastructure improvements and related professional services on the Uptown site. Other The City is engaged in other routine litigation incidental to the conduct of its municipal and utilities affairs. In the opinion of legal counsel, no legal proceedings are pending against the City, not covered by insurance, which would inhibit the City’s ability to perform its operations or materially affect its financial condition.

REQUIRED SUPPLEMENTARY INFORMATION


Required Supplementary Information(Unaudited)

Schedule of Funding Progress(b) (b-a)

Actuarial Unfunded ((b-a)/c)Actuarial (a) Accrued Actuarial UAALValuation Actuarial Liability Accrued (a/b) (c) as a % of

Date Value of (AAL) Attained Liability Funded Covered Covered(June 30) Assets Age (Asset) Ratio Payroll Payroll

1995 34,465,751$ 36,936,108$ 2,470,357$ 93.3% 4,738,025$ 52.1%1996 38,291,651 38,489,257 197,606 99.5% 4,955,119 4.0%1997 40,890,619 41,791,038 900,419 97.8% 5,354,387 16.8%1998 44,936,961 44,376,073 (560,888) 101.3% 5,859,722 - 1999 48,210,388 44,601,010 (3,609,378) 108.1% 6,150,107 - 2000 49,920,655 39,255,977 (10,664,678) 127.2% 5,922,589 - 2001 48,468,116 38,017,452 (10,450,664) 127.5% 6,105,158 - 2002 46,080,307 36,417,979 (9,662,328) 126.5% 5,694,688 - 2003 42,243,440 42,568,692 325,252 99.2% 6,035,235 5.4%2004 40,854,232 46,818,606 5,964,374 87.3% 6,140,062 97.1%2005 40,949,739 53,676,056 12,726,317 76.3% 6,150,943 206.9%

Schedule of Employer Contributions

Fiscal Annual ActualYear Ended Required Annual Percent

(June 30) Contribution Contribution Contributed1995 712,092$ 712,092$ 100.00%1996 702,972 702,972 100.00%1997 732,818 732,818 100.00%1998 656,938 656,938 100.00%1999 667,122 667,122 100.00%2000 645,056 645,056 100.00%2001 342,029 342,029 100.00%2002 430,013 430,013 100.00%2003 491,155 491,155 100.00%2004 469,453 469,453 100.00%2005 820,504 820,504 100.00%2006 1,516,565 1,516,565 100.00%2007 1,635,150 2,123,900 129.89%

Police and Fire Pension Trust Fund

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Combining and Individual Fund Statements and Schedules

Nonmajor Governmental Funds

SPECIAL REVENUE FUNDS

Special Revenue Funds are used to account for revenues derived fromspecific taxes or other "earmarked" revenue sources. The City of

Bay City utilizes the following special revenue funds:

Local Streets FundThis fund is used to account for local streets

maintenance funds received from the State of Michigan.

Fire Awareness FundThis fund is used to account for monies set aside to educate and

train the public on the hazards of fire and fire prevention activities.

Community Policing FundThis fund is used to account for monies set aside to educate and train the

public on crime prevention and to support the Community Policing initiative.

Parking Enforcement FundThis fund is used to account for activities relative to

downtown parking enforcement.

Solid Waste Management FundThis fund is used to account for all activities relative to

sanitation, recycling, and the landfill.

Community Development Block Grant FundThis fund is used to account for revenues received from the U.S. Departmentof Housing and Urban Development (H.U.D.) relative to the CDBG program.

Public Improvement FundThis fund is used to account for monies set aside for public improvement projects.

Building Inspection FundThis fund is used to account for all activities relative to building inspections and code enforcement services.

Neighborhood Opportunity FundThis fund is used to account for revenues and expenditures related to acquiring and/or demolishing blighted land and/or structures within specific neighborhoods of the City

DEBT SERVICE FUND

The Debt Service Fund was created to account for the payments of principal and interest on long-term, general obligation debt other than

that payable from special assessments and debt issued for and serviced by a governmental enterprise. In the City of Bay City, this fund provides

for the debt service on the 1993 Wastewater and Sewage Refunding Bondsand the 1991 Street Improvement Bonds. All other long-term debt is serviceddirectly from the fund responsible for the debt, since a debt service fund is not

required and financial resources are not being accumulated for principaand interest payments maturing in future years.

CAPITAL PROJECTS FUNDS

Capital Projects Funds are created to account for the financial resources to be used for the acquisition or construction of major

capital facilities by a governmental unit, except those financed by speciaassessment and proprietary funds. The City of Bay City utilizes the following

Capital Projects Funds:

Riverfront Redevelopment FundThis fund is used to account for revenues from EPA grants, other

federal, state, and local sources, and City funds for the redevelopmentof the City's Downtown Riverfront.

Economic Opportunities FundThis fund was setup to provide for the complete development of the

single-family residential subdivision on the City's south side, between Lincoln and Trumbull Avenues, as well as other projects as they arise.

Solid CommunityLocal Fire Community Parking Waste Development PublicStreets Awareness Policing Enforcement Management Block Grant Improvement

AssetsCash and cash equivalents -$ 1,847$ 2,562$ 12,489$ 253,606$ -$ 1,034,473$ Receivables (net of allowance for uncollectibles) Accounts 1,954 - - - 308,939 - - Delinquent taxes - - - - - - - Special assessments - - - - 13,453 - - Accrued interest - - - - - - 9,002 Due from other funds 214,416 - - - - 2,050 100 Due from other governments 108,003 - - - - 181,640 -

Total Assets 324,373$ 1,847$ 2,562$ 12,489$ 575,998$ 183,690$ 1,043,575$

Liabilities and fund balances LiabilitiesAccounts payable 12,760$ -$ 936$ 12,489$ 50,573$ 104,998$ 7,200$ Accrued liabilities 15,092 1,847 1,626 - 11,648 3,719 - Due to other funds 120,177 - - - 919 74,813 - Deposits payable - - - - - 160 - Deferred revenues - - - - - - -

Total liabilities 148,029 1,847 2,562 12,489 63,140 183,690 7,200

Fund balancesUnreserved: Undesignated 176,344 - - - 512,858 - 1,036,375

Total fund balances 176,344 - - - 512,858 - 1,036,375

Total liabilities and fund balances 324,373$ 1,847$ 2,562$ 12,489$ 575,998$ 183,690$ 1,043,575$

Special Revenue Funds

City of Bay City, MichiganNonmajor Governmental Funds

Combining Balance SheetJune 30, 2007

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Debt Service Capital Fund Projects Funds

Building Neighborhood Bond Riverfront Economic

Inspection Opportunity Total Sinking Fund Redevelopment Opportunites Total Total

31,375$ 154,972$ 1,491,324$ 383,476$ 483,204$ 919,822$ 1,403,026$ 3,277,826$

94,905 - 405,798 - 36,605 - 36,605 442,403 - - - 15,579 - - - 15,579

20,512 - 33,965 - - - - 33,965 - 1,349 10,351 3,337 4,205 8,004 12,209 25,897 - - 216,566 - - 2,303 2,303 218,869 - - 289,643 - - - - 289,643

146,792$ 156,321$ 2,447,647$ 402,392$ 524,014$ 930,129$ 1,454,143$ 4,304,182$

12,809$ -$ 201,765$ -$ 5,070$ 3,081$ 8,151$ 209,916$ 8,112 1 42,045 - - - - 42,045 2,873 - 198,782 - - - - 198,782

21,432 - 21,592 - - - - 21,592 7,299 - 7,299 15,579 - - - 22,878

52,525 1 471,483 15,579 5,070 3,081 8,151 495,213

94,267 156,320 1,976,164 386,813 518,944 927,048 1,445,992 3,808,969

94,267 156,320 1,976,164 386,813 518,944 927,048 1,445,992 3,808,969

146,792$ 156,321$ 2,447,647$ 402,392$ 524,014$ 930,129$ 1,454,143$ 4,304,182$

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Special Revenue Funds

Solid CommunityLocal Fire Community Parking Waste DevelopmentStreets Awareness Policing Enforcement Management Block Grant

RevenuesTaxes:

Property Taxes 214,416$ -$ -$ -$ -$ -$ Licenses and permits - - - - - - Intergovernmental:

Federal - - - - - 1,655,580 State 779,764 - - - - - Local - - - 16,474 - -

Charges for services:Sales - - - - 1,923,317 -

Fines and forfeitures - - - 25,772 - - Miscellaneous:

Interest earnings 231 - - - 156 - Reimbursements - - - - - - Sale of property - - - - - - Other 76 - - - 34,139 -

Total revenues 994,487 - - 42,246 1,957,612 1,655,580

ExpendituresCurrent:

Public safety - 100,159 111,693 42,246 - - Public works:

Highways, streets and bridges 1,134,731 - - - - - Physical environment - - - - 1,839,735 -

Economic development - - - - - 1,013,269 Capital outlay 7,000 - - - - 367,715 Debt service:

Principal - - - - - - Interest - - - - - -

Total expenditures 1,141,731 100,159 111,693 42,246 1,839,735 1,380,984

Excess of revenues over(under) expenditures (147,244) (100,159) (111,693) - 117,877 274,596

Other financing sources (uses)Transfer in 60,000 100,159 111,693 - - 224,799 Transfer out - - - - - (499,395)

Total other financing sources (uses) 60,000 100,159 111,693 - - (274,596)

Changes in fund balances (87,244) - - - 117,877 -

Fund balances - beginning of year 263,588 - - - 394,981 -

Fund balances - end of year 176,344$ -$ -$ -$ 512,858$ -$


City of Bay City, MichiganNonmajor Governmental Funds

Combining Statement of Revenues, Expenditures,and Changes in Fund Balances

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Debt Service Capital Fund Projects Funds

Public Building Neighborhood Bond Riverfront Economic

Improvement Inspection Opportunity Total Sinking Fund Redevelopment Opportunities Total Total

-$ -$ -$ 214,416$ 1,720,689$ -$ -$ -$ 1,935,105$ - 514,465 - 514,465 - - - - 514,465

- - - 1,655,580 - - - - 1,655,580 - - - 779,764 - 250,000 - 250,000 1,029,764 - - - 16,474 - - - - 16,474

- - - 1,923,317 - - - - 1,923,317 - - - 25,772 - - - - 25,772

57,249 - 8,512 66,148 55,663 23,745 46,157 69,902 191,713 - 10,259 - 10,259 - - - - 10,259 - - 71,522 71,522 - - - - 71,522

1,740 46,698 - 82,653 - 31,829 115,235 147,064 229,717

58,989 571,422 80,034 5,360,370 1,776,352 305,574 161,392 466,966 7,603,688

- 595,300 - 849,398 - - - - 849,398

- - - 1,134,731 - - - - 1,134,731 - - - 1,839,735 - - - - 1,839,735 - - 5,462 1,018,731 - 182,434 42,917 225,351 1,244,082

45,552 - - 420,267 - 252,435 8,369 260,804 681,071

- - - - 1,595,000 - - - 1,595,000 - - - - 1,175 - - - 1,175

45,552 595,300 5,462 5,262,862 1,596,175 434,869 51,286 486,155 7,345,192

13,437 (23,878) 74,572 97,508 180,177 (129,295) 110,106 (19,189) 258,496

- - - 496,651 - - 2,303 2,303 498,954 - - (39,521) (538,916) - - - - (538,916)

- - (39,521) (42,265) - - 2,303 2,303 (39,962)

13,437 (23,878) 35,051 55,243 180,177 (129,295) 112,409 (16,886) 218,534

1,022,938 118,145 121,269 1,920,921 206,636 648,239 814,639 1,462,878 3,590,435

1,036,375$ 94,267$ 156,320$ 1,976,164$ 386,813$ 518,944$ 927,048$ 1,445,992$ 3,808,969$

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City of Bay City, MichiganLocal Streets Fund

Schedule of Revenues, Expenditures, and Changesin Fund Balance - Budget and Actual



Revenues Taxes:

General property taxes 217,479$ 217,479$ 214,416$ (3,063)$ Intergovernmental: State 823,462 823,462 779,764 (43,698) Miscellaneous: Interest earnings 3,000 3,000 231 (2,769) Other 700 700 76 (624)

Total revenues 1,044,641 1,044,641 994,487 (50,154)

Expenditures Public works Highways, streets, and bridges 1,245,013 1,245,013 1,134,731 110,282 Capital outlay 7,000 7,000 7,000 -


Excess of revenues over(under) expenditures (207,372) (207,372) (147,244) 60,128

Other financing sources (uses) Transfer in 60,000 60,000 60,000 -



Fund balances - end of year 116,216$ 116,216$ 176,344$ 60,128$

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City of Bay City, MichiganFire Awareness Fund




Expenditures Public safety 103,610$ 103,610$ 100,159$ 3,451$

Other financing sources (uses) Transfer in 103,610 103,610 100,159 (3,451)

Changes in fund balances - - - -


Fund balances - end of year -$ -$ -$ -$

-66-

City of Bay City, MichiganCommunity Policing Fund




Expenditures Public safety 107,412$ 107,412$ 111,693$ (4,281)$

Other financing sources (uses) Transfer in 107,412 107,412 111,693 4,281




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City of Bay City, MichiganParking Enforcement Fund




Revenues Intergovernmental: Local 25,763$ 25,763$ 16,474$ 9,289$ Fines and forfeitures 23,000 23,000 25,772 (2,772)

Total revenues 48,763 48,763 42,246 6,517

Expenditures Public safety 48,763 48,763 42,246 6,517

Total expenditures 48,763 48,763 42,246 6,517




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City of Bay City, MichiganSolid Waste Management Fund




Revenues Charges for services: Sales 1,891,579$ 1,891,579$ 1,923,317$ 31,738$

Miscellaneous: Interest earnings 100 100 156 56 Other 14,600 14,600 34,139 19,539

Total revenues 1,906,279 1,906,279 1,957,612 51,333

Expenditures Physical environment 2,008,760 2,008,760 1,839,735 169,025

Changes in fund balances (102,481) (102,481) 117,877 220,358



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City of Bay City, MichiganCommunity Development Block Grant Fund




Revenues Intergovernmental: Federal 1,756,130$ 1,756,130$ 1,655,580$ (100,550)$

Expenditures Economic development 844,633 844,633 1,013,269 (168,636) Capital outlay 345,000 345,000 367,715 (22,715)

Total expenditures 1,189,633 1,189,633 1,380,984 (191,351)

Excess of revenues over(under) expenditures 566,497 566,497 274,596 (291,901)

Other financing sources (uses) Transfer in 200,000 200,000 224,799 24,799 Transfer out (635,997) (635,997) (499,395) 136,602

Total other financing sources (uses) (435,997) (435,997) (274,596) 161,401

Changes in fund balances 130,500 130,500 - (130,500)


Fund balances - end of year 130,500$ 130,500$ -$ (130,500)$

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City of Bay City, MichiganPublic Improvement Fund




Revenues Interest earnings 5,000$ 5,000$ 57,249$ 52,249$ Other - - 1,740 1,740

Total revenues 5,000 5,000 58,989 53,989

Expenditures Capital outlay 950,000 950,000 45,552 904,448


Fund balances - beginning of year 1,022,938 1,022,938 1,022,938 -

Fund balances - end of year 77,938$ 77,938$ 1,036,375$ 958,437$

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City of Bay City, MichiganBuilding Inspection Fund




Revenues Licenses and permits 552,905$ 552,905$ 514,465$ (38,440)$ Miscellaneous: Reimbursements 30,500 30,500 10,259 (20,241) Other 16,860 16,860 46,698 29,838

Total revenues 600,265 600,265 571,422 (28,843)

Expenditures Public safety 646,301 646,301 595,300 51,001




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City of Bay City, MichiganNeighborhood Opportunity Fund




Revenues Miscellaneous:

Interest 4,000$ 4,000$ 8,512$ 4,512$ Sale of property - 35,521 71,522 36,001

Total revenues 4,000 39,521 80,034 40,513

Expenditures Economic development 89,330 89,330 5,462 83,868

Excess of revenues over(under) expenditures (85,330) (49,809) 74,572 124,381

Other financing sources (uses) Transfer out (4,000) (39,521) (39,521) -




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City of Bay City, MichiganBond Sinking Fund




Revenues Taxes: General property taxes 1,697,444$ 1,697,444$ 1,720,689$ 23,245$ Miscellaneous: Interest earnings 14,000 14,000 55,663 41,663

Total revenues 1,711,444 1,711,444 1,776,352 64,908

Expenditures Debt service: Principal 1,595,000 1,595,000 1,595,000 - Interest and fiscal charges 2,850 2,850 1,175 1,675


Changes in fund balances 113,594 113,594 180,177 66,583

Fund balances - beginning of year, 206,636 206,636 206,636 -


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Nonmajor Enterprise FundsEnterprise Funds are established to account for the financing ofself-supporting municipal activities which render services on a

user charge basis to the general public. The significantcharacteristic of an enterprise fund is that the accounting systemallows for the determination of whether the activity is operated at

a profit or loss. All accounts of enterprise funds are self-contained, providing a means for creditors, legislators, and the

general public to evaluate the performance of the municipal enterprise on a comparable basis with investor-owned enterprises in the sameindustry. The City of Bay City has the following Nonmajor Enterprise Funds

Oak Ridge Cemetery FundThis fund is used to account for the operation and maintenance of a

sixty acre cemetery within the City.

James Clements Airport FundThis fund is used to account for the operation and maintenance of the

City's municipal airport facilities.

Liberty Harbor MarinaThis fund is used to account for the operation and maintenance of the

City's municipal marina facilities.

City of Bay City, MichiganNonmajor Enterprise Funds


James LibertyOak Ridge Clements Harbor Cemetery Airport Marina Total

AssetsCurrent assetsCash and cash equivalents 105,467$ 23,197$ 154,100$ 282,764$ Receivables (net of allowance for uncollectibles) Accounts 3,649 4,449 55 8,153 Accrued interest 1,041 - 1,340 2,381 Inventory - 13,328 - 13,328

Total current assets 110,157 40,974 155,495 306,626

Capital assetsLand and improvements 300,888 1,867,479 2,738,574 4,906,941 Air rights - 95,421 - 95,421 Construction in progress 2,473 25,000 - 27,473 Buildings 54,012 397,507 193,825 645,344 Machinery and equipment 1,130 9,383 82,667 93,180

358,503 2,394,790 3,015,066 5,768,359 Less: accumulated depreciation 152,883 822,555 932,995 1,908,433

Net capital assets 205,620 1,572,235 2,082,071 3,859,926

Total assets 315,777 1,613,209 2,237,566 4,166,552

LiabilitiesCurrent liabilitiesAccounts payable 11,531 7,855 13,889 33,275 Accrued liabilities - - 316 316 Due to other funds - 4,873 - 4,873

Total current liabilities 11,531 12,728 14,205 38,464

Net assetsInvested in capital assets 205,620 1,572,235 2,082,071 3,859,926 Unrestricted 98,626 28,246 141,290 268,162

Total net assets 304,246$ 1,600,481$ 2,223,361$ 4,128,088$

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Operating revenuesCharges for services:

Sales 42,421$ 78,721$ 2,397$ 123,539$ Rents - 6,350 121,920 128,270

Miscellaneous - 15,537 192 15,729

Total operating revenues 42,421 100,608 124,509 267,538

Operating expenses Cost of sales and service 116,708 132,060 124,711 373,479 Depreciation 9,352 82,608 60,188 152,148

Total operating expenses 126,060 214,668 184,899 525,627

Operating income (loss) (83,639) (114,060) (60,390) (258,089)

Nonoperating revenues (expenses)Intergovernmental:

Federal grants - 20,000 - 20,000 State grants - 242,758 - 242,758

Interest earnings 6,517 25 7,112 13,654

Total nonoperating revenues (expenses) 6,517 262,783 7,112 276,412

Income (loss) before transfers (77,122) 148,723 (53,278) 18,323

Transfers Transfer in 83,821 53,263 - 137,084

Changes in net assets 6,699 201,986 (53,278) 155,407

Net assets - beginning of year 297,547 1,398,495 2,276,639 3,972,681

Net assets - end of year 304,246$ 1,600,481$ 2,223,361$ 4,128,088$

Combining Statement of Revenues, Expenses, and Changes in Net AssetsFor the Year Ended June 30, 2007

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Cash flows from operating activitiesCash received from customers and users 42,563$ 99,167$ 124,712$ 266,442$ Interfund reimbursements (239) 4,501 (470) 3,792 Cash payments to suppliers for goods and services (113,498) (140,725) (130,478) (384,701) Cash payments to employees for services - - (12,721) (12,721) Other operating revenue - 15,537 192 15,729

Net cash provided (used) by operating activities (71,174) (21,520) (18,765) (111,459)

Cash flows from noncapital financing activities Intergovernmental - federal grant - 20,000 - 20,000 Intergovernmental - state grant - 242,758 - 242,758 Transfers in 83,821 53,263 - 137,084

Net cash flows from noncapital financing activities 83,821 316,021 - 399,842

Cash flows from capital and related financing activitiesPurchase of capital assets (27,782) (274,000) - (301,782)

Cash flows from investing activitiesInterest received 6,517 25 7,112 13,654

Net increase in cash and cash equivalents (8,618) 20,526 (11,653) 255

Cash and cash equivalents, beginning of period 114,085 2,671 165,753 282,509

Cash and cash equivalents, end of period 105,467$ 23,197$ 154,100$ 282,764$


Operating income (loss) (83,639)$ (114,060)$ (60,390)$ (258,089)$


Depreciation 9,352 82,608 60,188 152,148 (Increase) decrease in assets:

Accounts receivable (47) 9,812 (55) 9,710 Accrued interest receivable 189 - 450 639 Due from other funds 624 - - 624 Due from other governments - 4,284 - 4,284 Inventory - (13,328) - (13,328) Prepaid expenses - - - -

Increase (decrease) in liabilities:Accounts payable 2,586 4,663 (18,492) (11,243) Accrued liabilities - - 4 4 Due to other funds (239) 4,501 (470) 3,792

Total adjustments 12,465 92,540 41,625 146,630

Net cash provided (used) by operating activities (71,174)$ (21,520)$ (18,765)$ (111,459)$

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INTERNAL SERVICE FUNDSInternal Service Funds are used to account for the financing of goods

or services provided by one department or agency to other departmentsor agencies of the government and to other governments, on a cost

reimbursement basis. The City of Bay City has the followingInternal Service Funds:

Motor Equipment Revolving FundThe fund is used to account for all activities relative to the maintenance

and replacement of all City vehicles and large equipment.

Information Systems FundThis fund accounts for all activities necessary to provide technology

services to all City departments.

Liability/Property Self-Insurance FundThe function of this fund is to provide liability and property insurance

to all City departments.

Site Remediation FundThis fund accounts for the expenditures relative to the cleanup and

remediation of the Middlegrounds Landfill.

Benefits Program FundThis fund accounts for the healthcare, life insurance, workers compensation,

unemployment, and retirement benefits provided to all City employees and retirees

Motor Liability/Equipment Information Property Self- Site Benefits Revolving Systems Insurance Remediation Program Total

Assets

Current assetsCash and cash equivalents 960,140$ 94,280$ 1,193,392$ 203,834$ 2,457,554$ 4,909,200$ Receivables (net of allowance for uncollectibles) Accounts 627 999 3,974 - 398 5,998 Accrued interest 8,355 - - 1,774 11,939 22,068 Due from other funds - 39,618 - - 423,003 462,621 Inventories 93,047 18,933 - - - 111,980 Prepaid expenses - - - - 114,126 114,126 Deposits - - 61,427 - 269,366 330,793

Total current assets 1,062,169 153,830 1,258,793 205,608 3,276,386 5,956,786

Capital assetsMachinery and equipment 12,121,393 690,093 - - - 12,811,486 Less: accumulated depreciation 6,793,420 517,846 - - - 7,311,266

Net capital assets 5,327,973 172,247 - - - 5,500,220

Total assets 6,390,142 326,077 1,258,793 205,608 3,276,386 11,457,006

Liabilities

Current liabilitiesAccounts payable 49,401 22,292 74,105 - 341,583 487,381 Accrued liabilities 15,019 10,575 - - 1,934 27,528 Interest payable 3,582 - - - - 3,582 Claims payable - - 780,928 - 919,223 1,700,151 Due to other funds 2,066 1,608 - - 344,164 347,838 Due to other governments - - - - 879 879 Deferred revenue - - - 205,608 - 205,608 Accrued compensated

absences - current 35,441 49,000 - - - 84,441 Notes payable - current 42,685 - - - - 42,685

Total current liabilities 148,194 83,475 855,033 205,608 1,607,783 2,900,093

Long-term liabilitiesAccrued compensated absences 21,229 51,423 - - - 72,652 Notes payable 239,355 - - - - 239,355

Total long-term liabilities 260,584 51,423 - - - 312,007

Total liabilities 408,778 134,898 855,033 205,608 1,607,783 3,212,100

Net assetsInvested in capital assets,

net of related debt 5,045,933 172,247 - - - 5,218,180 Unrestricted 935,431 18,932 403,760 - 1,668,603 3,026,726

5,981,364$ 191,179$ 403,760$ -$ 1,668,603$ 8,244,906$

City of Bay City, MichiganInternal Service Funds


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Motor Liability/ Equipment Information Property Self- Site Benefits Revolving Systems Insurance Remediation Program Total

Operating revenuesCharges for services 3,120,008$ 774,246$ 1,523,141$ -$ 12,063,697$ 17,481,092$ Miscellaneous:

Employee contributions - - - - 608,323 608,323 Other 6,028 21,801 7,014 - 56,629 91,472

Total operating revenues 3,126,036 796,047 1,530,155 - 12,728,649 18,180,887

Operating expenses Cost of sales and service 2,085,701 816,165 - - - 2,901,866 Administration - - 29,830 - 155,999 185,829 Claims and benefits - - 1,096,565 - 12,182,848 13,279,413 Depreciation 880,743 56,219 - - - 936,962

Total operating expenses 2,966,444 872,384 1,126,395 - 12,338,847 17,304,070

Operating income (loss) 159,592 (76,337) 403,760 - 389,802 876,817

Nonoperating revenues (expenses)Interest earnings 50,282 - - - 38,869 89,151 Interest expense (11,402) - - - - (11,402) Net gain / loss on disposal of capital assets 24,794 - - - - 24,794

Total nonoperating revenues (expenses) 63,674 - - - 38,869 102,543

Changes in net assets 223,266 (76,337) 403,760 - 428,671 979,360

Net assets - beginning of year 5,758,098 267,516 - - 1,239,932 7,265,546

Net assets - end of year 5,981,364$ 191,179$ 403,760$ -$ 1,668,603$ 8,244,906$

Combining Statement of Revenues, Expensesand Changes in Net Assets



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Motor Liability/ Equipment Information Property Self- Site Benefits Revolving Systems Insurance Remediation Program Total

Cash flows from operating activitiesCash received from interfund services provided 3,121,597$ 754,919$ 1,644,996$ 307$ 12,824,110$ 18,345,929$ Cash payments to suppliers for goods and services (1,228,877) (271,436) (947,912) 10,993 (11,471,849) (13,909,081) Cash payments to employees for services (883,194) (495,398) - - - (1,378,592)

Net cash provided (used) by operating activities 1,009,526 (11,915) 697,084 11,300 1,352,261 3,058,256

Cash flows from capital and related financing activitiesPurchase of capital assets (1,052,117) (116,359) - - - (1,168,476) Proceeds from sale of capital assets 34,894 - - - - 34,894 Principal paid on debt (41,104) - - - - (41,104) Interest paid on debt (11,402) - - - - (11,402)

Net cash (used) by capital andrelated financing activities (1,069,729) (116,359) - - - (1,186,088)

Cash flows from investing activitiesInterest received 50,282 - - - 38,869 89,151

Net increase (decrease) in cash and cash equivalents (9,921) (128,274) 697,084 11,300 1,391,130 1,961,319

Cash and cash equivalents, beginning of period 970,061 222,554 496,308 192,534 1,066,424 2,947,881

Cash and cash equivalents, end of period 960,140$ 94,280$ 1,193,392$ 203,834$ 2,457,554$ 4,909,200$


Operating income (loss) 159,592$ (76,337)$ 403,760$ -$ 389,802$ 876,817$


Depreciation 880,743 56,219 - - - 936,962 (Increase) decrease in assets:

Accounts receivable 2,224 282 15,505 - 260 18,271 Accrued interest 2,125 - - 307 (11,513) (9,081) Due from other funds - (39,618) 99,336 - (237,450) (177,732) Inventory 16,023 3,202 - - - 19,225 Prepaid expenses - - - - 706,770 706,770 Deposits - - (61,427) - (12,648) (74,075)

Increase (decrease) in liabilities:Accounts payable 10,126 21,009 41,368 - 63,224 135,727 Accrued liabilities (23,655) 206 - - 1,098 (22,351) Interest payable (522) - - - - (522) Claims payable - - 198,542 - 107,845 306,387 Due to other funds (8,788) (1,792) - - 344,164 333,584 Due to other governments - - - - 709 709 Deferred revenue - - - 10,993 - 10,993 Accrued compensated absences (28,342) 24,914 - - - (3,428)

Total adjustments 849,934 64,422 293,324 11,300 962,459 2,181,439

Net cash provided (used) by operating activities 1,009,526$ (11,915)$ 697,084$ 11,300$ 1,352,261$ 3,058,256$

-80-

FIDUCIARY FUNDSFiduciary Funds are set up to account for the assets held bythe government in a trustee capacity for other individuals,

governmental entities, and non-public organizations. Use of thesefunds facilitates the discharge of responsibilities placed upon the City

by virtue of law or other authority. In the City of Bay City, the trust fundsare used to account for the Police and Fire Retirement System, the expendable

trust funds relative to general healthcare and healthcare for Police and Fire personnel and retirees, the Current Tax Collections Agency Fund,

and the general Trust and Agency Fund.

Pension Trust Trust Funds

GeneralPolice Employees Police & Fire& Fire Health Care Health Care

Retirement Investment Investment Total

Cash and cash

equivalents 694,971$ 1,495,691$ 610,944$ 2,801,606$ Investments

Mutual funds 18,661,887 784,905 512,435 19,959,227 Government securities 10,025,428 - - 10,025,428 Corporate bonds 2,925,872 - - 2,925,872 Common stock 22,918,116 - - 22,918,116

Accounts receivable 187,192 - - 187,192 Interest receivable 177,525 13,015 5,316 195,856

Total assets 55,590,991 2,293,611 1,128,695 59,013,297

LiabilitiesAccounts payable 100,011 - - 100,011

Net assetsHeld in trust for employees' pension benefits 55,490,980 - - 55,490,980 Held in trust for employees' postemployment health care benefits - 2,293,611 1,128,695 3,422,306

Total net assets 55,490,980$ 2,293,611$ 1,128,695$ 58,913,286$

Assets


Combining Statement of Plan Net AssetsJune 30, 2007

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PensionTrust

General Police &Police Employees Fire& Fire Health Care Health Care

Retirement Investment Investment TotalAdditions

ContributionsEmployer 2,123,900$ 425,298$ 153,897$ 2,703,095$ Plan members 520,599 - - 520,599

Total contributions 2,644,499 425,298 153,897 3,223,694

Investment income Interest and dividends 1,161,952 73,239 33,635 1,268,826 Net appreciation in fair value of investments 6,264,264 127,809 81,825 6,473,898

Investment expense (349,470) - - (349,470)

Net investment income 7,076,746 201,048 115,460 7,393,254

Other additions 32,524 - - 32,524

Total additions 9,753,769 626,346 269,357 10,649,472

DeductionsBenefits and refunds paid to participants 4,273,618 - - 4,273,618 Administrative expenses 135,706 - - 135,706

Total deductions 4,409,324 - - 4,409,324

Net increase in plan net assets 5,344,445 626,346 269,357 6,240,148

Net assets held in trust for pension benefitsBeginning of year 50,146,535 1,667,265 859,338 52,673,138

End of year 55,490,980$ 2,293,611$ 1,128,695$ 58,913,286$

Trust Funds


Combining Statement of Changes in Plan Net AssetsFor the Year Ended June 30, 2007

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CurrentTrust and Tax

Agency Collection TotalASSETS

Cash and cash equivalents 148,306$ -$ 148,306$

LIABILITIES

Accounts payable 48,177$ -$ 48,177$ Due to other governmental units 78,928 - 78,928 Deposits 21,201 - 21,201

TOTAL LIABILITIES 148,306$ -$ 148,306$

City of Bay City, MichiganAgency Funds

Combining Statement of Fiduciary Assets and LiabilitiesJune 30, 2007

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City of Bay City, MichiganAgency Funds

Combining Statement of Changes in Assets and LiabilitiesFor the Year Ended June 30, 2007

BALANCE BALANCEJULY 1, JUNE 30,

2006 ADDITIONS DEDUCTIONS 2007TRUST & AGENCY FUND

ASSETSCash and cash equivalents 75,280$ 5,149,275$ 5,076,249$ 148,306$

LIABILITIESAccounts payable 459$ 59,801$ 12,083$ 48,177$ Due to other funds - 146,471 146,471 - Due to other governmental units - 5,573,293 5,494,365 78,928 Deposits 74,821 70,038 123,658 21,201

TOTAL LIABILITIES 75,280$ 5,849,603$ 5,776,577$ 148,306$

CURRENT TAX COLLECTION FUNDASSETS

Cash and cash equivalents -$ 33,065,280$ 33,065,280$ -$ Accounts receivable - 10 10 -

TOTAL ASSETS -$ 33,065,290$ 33,065,290$ -$

LIABILITIESAccounts payable -$ 20,348,025$ 20,348,025$ -$ Due to other funds - 12,065,368 12,065,368 - Due to other governmental units - 21,161,660 21,161,660 -

TOTAL LIABILITIES -$ 53,575,053$ 53,575,053$ -$

TOTAL - ALL AGENCY FUNDS

ASSETSCash and cash equivalents 75,280$ 38,214,555$ 38,141,529$ 148,306$ Accounts receivable - 10 10 -

TOTAL ASSETS 75,280$ 38,214,565$ 38,141,539$ 148,306$

LIABILITIES LIABILITIESAccounts payable 459$ 20,407,826$ 20,360,108$ 48,177$ Due to other funds - 12,065,368 12,065,368 - Due to other governmental units - 26,734,953 26,656,025 78,928 Deposits 74,821 70,038 123,658 21,201

TOTAL LIABILITIES 75,280$ 59,278,185$ 59,205,159$ 148,306$

-84-

COMPONENT UNITSThe Component Units provide economic development and financing

services to specific geographic areas within the City limits.These entities are legally separate from the City. However, they are

fiscally dependent on the City because the City Commission is responsiblefor approving their annual operating budgets and any debt issuance. All discrete component units are accounted for as governmental fund

types. The Component Units within the City of Bay City are: DowntownDevelopment Authority, Midland Street TIFA, Kresge's DDA,

Marquette District TIFA, Water Street DDA, Marina Development TIFA,Allen Healthcare DDA, Research Center Development TIFA, Knepp's DDA,

Columbus Avenue Management Board, Brownfield Redevelopment Authority,Midland Street Management Board, P.O.W.E.R. Fund, Economic Development

Corporation, Downtown Management Board, and Wenonah Park Properties

June 30, 2007

Downtown Midland Development Statement of Street Statement of

Authority Adjustments Net Assets TIFA Adjustments Net Assets

ASSETS

Cash and cash equivalents 136,218$ -$ 136,218$ 151,569$ -$ 151,569$ Receivables: Accounts 11,114 - 11,114 - - - Delinquent taxes 4,924 - 4,924 - - - Accrued interest 1,185 - 1,185 1,319 - 1,319 Notes - - - - - - Lease - - - - - - Due from other governments - - - - - - Capital assets, net - 137,143 137,143 - 364,925 364,925

TOTAL ASSETS 153,441$ 137,143 290,584 152,888$ 364,925 517,813

LIABILITIESAccounts payable 48,060$ - 48,060 26,162$ - 26,162 Accrued liabilities 25 - 25 - - - Deferred revenue 38,272 (38,272) - - - - Long-term debt: Bonds payable - - - - - - Notes payable - - - - - -

TOTAL LIABILITIES 86,357 (38,272) 48,085 26,162 - 26,162

FUND BALANCES/NET ASSETSUnreserved 67,084 (67,084) - 126,726 (126,726) -

TOTAL LIABILITIES AND FUND BALANCES 153,441$ 152,888$

NET ASSETSInvested in capital assets, net of related debt 137,143 137,143 364,925 364,925 Unrestricted 105,356 105,356 126,726 126,726

TOTAL NET ASSETS 242,499$ 242,499$ 491,651$ 491,651$

City of Bay City, MichiganDowntown Development Authority, Midland Street TIFA,

Marquette District TIFA, and Water Street DDAStatement of Net Assets and Governmental Fund Balance Sheet

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Marquette Kresge's Statement of District Statement of

DDA Adjustments Net Assets TIFA Adjustments Net Assets

45,144$ -$ 45,144$ 1,287,788$ -$ 1,287,788$

- - - - - - - - - - - -

393 - 393 11,206 - 11,206 - - - - - - - - - - - - - - - - - - - 7,108 7,108 - 1,270,700 1,270,700

45,537$ 7,108 52,645 1,298,994$ 1,270,700 2,569,694

-$ - - 55,776$ - 55,776 - - - 1,518 - 1,518 - - - - - -

- - - - - - - - - - - -

- - - 57,294 - 57,294

45,537 (45,537) - 1,241,700 (1,241,700) -

45,537$ 1,298,994$

7,108 7,108 1,270,700 1,270,700 45,537 45,537 1,241,700 1,241,700

52,645$ 52,645$ 2,512,400$ 2,512,400$

-85-

Water MarinaStreet Statement of Develop. Statement ofDDA Adjustments Net Assets TIFA Adjustments Net Assets

ASSETS

Cash and cash equivalents 867,988$ -$ 867,988$ 81,742$ -$ 81,742$ Receivables: Accounts - - - - - - Delinquent taxes - - - - - - Accrued interest 7,553 - 7,553 711 - 711 Notes - - - - - - Lease - - - - - - Due from other governments - - - - - - Capital assets, net - 2,312,657 2,312,657 - 523,818 523,818

TOTAL ASSETS 875,541$ 2,312,657 3,188,198 82,453$ 523,818 606,271

LIABILITIESAccounts payable 74,419$ - 74,419 64,266$ - 64,266 Accrued liabilities - 15,255 15,255 - - - Deferred revenue - - - - - - Long-term debt: Bonds payable - 2,470,000 2,470,000 - - - Notes payable - - - - - -

TOTAL LIABILITIES 74,419 2,485,255 2,559,674 64,266 - 64,266

FUND BALANCES/NET ASSETSUnreserved 801,122 (801,122) - 18,187 (18,187) -

TOTAL LIABILITIES AND FUND BALANCES 875,541$ 82,453$

NET ASSETSInvested in capital assets (157,343) (157,343) 523,818 523,818 Unrestricted 785,867 785,867 18,187 18,187

TOTAL NET ASSETS (DEFICIT) 628,524$ 628,524$ 542,005$ 542,005$

City of Bay City, MichiganMarina Development TIFA, Allen Healthcare DDA, and Knepp's DDA

Statement of Net Assets and Governmental Fund Balance SheetJune 30, 2007

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Allen Healthcare Statement of Knepp's Statement of

DDA Adjustments Net Assets DDA Adjustments Net Assets

1,532$ -$ 1,532$ 42,124$ -$ 42,124$

- - - - - - - - - - - -

13 - 13 367 - 367 - - - - - - - - - - - - - - - - - - - - - - 88,235 88,235

1,545$ - 1,545 42,491$ 88,235 130,726

-$ - - -$ - - - - - - - - - - - - - -

- - - - - - - 45,326 45,326 - - -

- 45,326 45,326 - - -

1,545 (1,545) - 42,491 (42,491) -

1,545$ 42,491$

- - 88,235 88,235 (43,781) (43,781) 42,491 42,491

(43,781)$ (43,781)$ 130,726$ 130,726$

-86-

Downtown Statement Statement Development of Midland St. of

Authority Adjustments Activities TIFA Adjustments Activities

REVENUES Intergovernmental:

State -$ -$ -$ -$ -$ -$

Taxes:Tax increment - - - 103,963 - 103,963 Special assessments 74,567 37,666 112,233 - - -

Charges for services:Rents 93,537 - 93,537 - - -

Miscellaneous:Interest earnings 4,291 - 4,291 15,557 - 15,557 Other 30,000 - 30,000 - - -

TOTAL REVENUES 202,395 37,666 240,061 119,520 - 119,520

EXPENDITURES/EXPENSESCurrent:

Economic development 127,338 - 127,338 1,502 - 1,502 Depreciation - 18,321 18,321 - 14,275 14,275 Capital outlay 22,471 (16,411) 6,060 265,607 (177,656) 87,951 Debt service:

Principal - - - - - - Interest - - - - - -

TOTAL EXPENDITURES/EXPENSES 149,809 1,910 151,719 267,109 (163,381) 103,728

NET CHANGE IN FUND BALANCES / NET ASSETS 52,586 35,756 88,342 (147,589) 163,381 15,792

FUND BALANCE / NET ASSETS, BEGINNING OF PERIOD 14,498 139,659 154,157 274,315 201,544 475,859

FUND BALANCE / NET ASSETS, END OF PERIOD 67,084$ 175,415$ 242,499$ 126,726$ 364,925$ 491,651$

For the Year Ended June 30, 2007and Changes in Fund Balances


Statement of Activities and Governmental Fund Statement of Revenues, Expenditures,

Downtown Development Authority, Midland Street TIFA,Marquette District TIFA, and Water Street DDA

-87-

Statement Marquette StatementKresge's of District of

DDA Adjustments Activities TIFA Adjustments Activities

-$ -$ -$ -$ -$ -$

1,670 - 1,670 429,307 - 429,307 - - - - - -

- - - - - -

2,545 - 2,545 83,804 - 83,804 - - - - - -

4,215 - 4,215 513,111 - 513,111

- - - 150,330 (10,613) 139,717 - 256 256 - 63,122 63,122

7,364 (7,364) - 170,652 (169,684) 968

- - - - - - - - - - - -

7,364 (7,108) 256 320,982 (117,175) 203,807

(3,149) 7,108 3,959 192,129 117,175 309,304

48,686 - 48,686 1,049,571 1,153,525 2,203,096

45,537$ 7,108$ 52,645$ 1,241,700$ 1,270,700$ 2,512,400$

-87-

Water Statement Marina StatementStreet of Develop. ofDDA Adjustments Activities TIFA Adjustments Activities

REVENUES: Intergovernmental:

State 779$ -$ 779$ -$ -$ -$

Taxes:Tax increment 304,608 - 304,608 - - -

Miscellaneous:Interest earnings 54,984 - 54,984 10,273 - 10,273

TOTAL REVENUES 360,371 - 360,371 10,273 - 10,273

EXPENDITURES/EXPENSES:Current:

Economic development 57,072 - 57,072 23,994 (20,168) 3,826 Depreciation - 110,356 110,356 - 7,024 7,024 Capital outlay 122,005 (121,171) 834 212,976 (212,976) - Debt service:

Principal 135,000 (135,000) - - - - Interest 95,578 (675) 94,903 - - -

TOTAL EXPENDITURES/EXPENSES 409,655 (146,490) 263,165 236,970 (226,120) 10,850

NET CHANGE IN FUND BALANCES / NET ASSETS (49,284) 146,490 97,206 (226,697) 226,120 (577)

FUND BALANCE / NET ASSETS, BEGINNING OF PERIOD 850,406 (319,088) 531,318 244,884 297,698 542,582

FUND BALANCE / NET ASSETS, END OF PERIOD 801,122$ (172,598)$ 628,524$ 18,187$ 523,818$ 542,005$


City of Bay City, MichiganMarina Development TIFA, Allen Healthcare DDA, and Knepp's DDA

Statement of Activities and Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances

-88-

AllenHealth- Statement Statement

care of Knepp's ofDDA Adjustments Activities DDA Adjustments Activities

-$ -$ -$ -$ -$ -$

19,588 - 19,588 15,299 - 15,299

502 - 502 2,705 - 2,705

20,090 - 20,090 18,004 - 18,004

- - - 1,240 - 1,240 - - - - 1,728 1,728 - - - 9,346 (9,346) -

14,779 (14,779) - - - - 4,808 - 4,808 - - -

19,587 (14,779) 4,808 10,586 (7,618) 2,968

503 14,779 15,282 7,418 7,618 15,036

1,042 (60,105) (59,063) 35,073 80,617 115,690

1,545$ (45,326)$ (43,781)$ 42,491$ 88,235$ 130,726$

-88-

STATISTICAL SECTIONFinancial Trends - These schedules contain trend information to help the

reader understand how the city's financial performance and well-beinghave changed over time.

Revenue Capacity - These schedules contain information to help the readerassess the factors affecting the city's ability to generate its property taxes

Debt Capacity - These schedules present information to help the reader assessthe affordability of the city's current levels of outstanding debt and the

city's ability to issue additional debt in the future.

Demographic and Economic Information - These schedules offer demographicand economic indicators to help the reader understand the environment withinwhich the city's financial activities take place and to help make comparisons

over time and with other governments.

Operating Information - These schedules contain information about the city'soperations and resources to help the reader understand how the city's financia

information relates to the services the city provides and the activities it performs.

Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The city implementedStatement 34 in 2003; schedules presenting government-wide information includeinformation beginning in that year.

Table 1

2003 2004 2005 2006 2007Governmental activities Invested in capital assets, net of related debt 64,467,354$ 58,960,994$ 60,326,443$ 61,608,056$ 60,760,119$ Restricted 1,377,911 2,270,720 1,400,317 1,669,514 1,832,805 Unrestricted 9,943,254 13,634,247 10,364,764 11,588,878 12,085,327 Total governmental activities net assets 75,788,519$ 74,865,961$ 72,091,524$ 74,866,448$ 74,678,251$

Business-type activities Invested in capital assets, net of related debt 102,647,067$ 98,389,242$ 96,461,842$ 89,473,335$ 90,735,387$ Restricted 1,160,696 - - - - Unrestricted 26,340,649 30,266,336 30,668,638 32,243,217 31,542,821 Total business-type activities net assets 130,148,412$ 128,655,578$ 127,130,480$ 121,716,552$ 122,278,208$

Primary government Invested in capital assets, net of related debt 167,114,421$ 157,350,236$ 156,788,285$ 151,081,391$ 151,495,506$ Restricted 2,538,607 2,270,720 1,400,317 1,669,514 1,832,805 Unrestricted 36,283,903 43,900,583 41,033,402 43,832,095 43,628,148 Total primary government net assets 205,936,931$ 203,521,539$ 199,222,004$ 196,583,000$ 196,956,459$

Note: The City began to report accrual information when it implemented GASB Statement 34in fiscal year 2003.

(accrual basis of accounting)

Fiscal Year

City of Bay City, MichiganNet Assets by Component

Last Five Fiscal Years

-89-

Table 2

2003 2004 2005 2006 2007ExpensesGovernmental activities: Public safety 13,145$ 13,014$ 13,429$ 14,170$ 14,640$ Community and economic development 1,859 - 2,037 2,116 2,602 Public works 5,638 11,019 10,909 9,871 9,236 General government 3,333 3,028 2,286 1,614 2,064 Recreation and culture 1,046 941 1,129 1,249 1,164 Interest on long-term debt 1,562 1,358 1,544 1,298 1,302 Total governmental activities expenses 26,583 29,360 31,334 30,318 31,008 Business-type activities: Electric 22,574 22,116 24,134 26,079 26,537 Water 7,330 6,939 6,870 7,231 7,694 Sewer 8,318 10,340 11,468 12,487 12,165 Public works 421 435 421 463 519 Total business-type activities expenses 38,643 39,830 42,893 46,260 46,915 Total primary government expenses 65,226$ 69,190$ 74,227$ 76,578$ 77,923$

Program RevenuesGovernmental activities: Charges for services Public safety 665$ 640$ 768$ 960$ 811$ General government 88 1,036 1,299 1,419 1,256 Public works 1,961 2,006 1,923 1,939 1,973 Recreation and culture 4 6 13 8 10 Other - - (16) 125 71 Operating grants and contributions 2,849 5,899 6,296 5,797 5,646 Capital grants and contributions 35 21 618 47 1,659 Total governmental activities program revenues 5,602 9,608 10,901 10,295 11,426 Business-type activities: Charges for services Electric 21,480 21,972 22,991 23,770 26,060 Water 6,758 7,060 7,342 7,204 7,246 Sewer 7,576 8,358 9,931 11,512 11,726 Public works 399 230 219 215 188 Operating grants and contributions - 26 164 246 102 Capital grants and contributions - - - 455 482 Total business-type activities program revenues 36,213 37,646 40,647 43,402 45,804 Total primary government program revenues 41,815$ 47,254$ 51,548$ 53,697$ 57,230$

Net (expense)/revenueGovernmental activitites (20,981)$ (19,773)$ (20,433)$ (20,023)$ (19,582)$ Business-type activities (2,430) (2,184) (2,246) (2,858) (1,111) Total primary government net expense (23,411)$ (21,936)$ (22,679)$ (22,881)$ (20,693)$

General Revenues and Other Changes in Net AssetsGovernmental activities: Property taxes 13,263$ 13,142$ 12,934$ 13,592$ 13,640$ Unrestricted grants and contributions 5,572 5,458 5,395 5,172 5,127 Investment earnings 260 274 381 398 702 Miscellaneous 4,519 67 71 111 74 Transfers (81) (119) (311) 3,525 (149) Total governmental activities 23,533 18,822 18,470 22,798 19,394 Business-type activities: Investment earnings 658 438 841 922 1,459 Miscellaneous 117 40 213 47 64 Transfers 81 119 311 (3,525) 149 Total business-type activities 856 597 1,365 (2,556) 1,672 Total primary government 24,389$ 19,419$ 19,835$ 20,242$ 21,066$

Change in Net AssetsGovernmental activities 2,552$ (951)$ (1,963)$ 2,775$ (188)$ Business-type activities (1,574) (1,587) (881) (5,414) 561 Total primary government 978$ (2,538)$ (2,844)$ (2,639)$ 373$

Note : The City began to report accrual information when it implemented GASB Statement 34 in fiscal year 2003.

Fiscal Year

City of Bay City, MichiganChanges in Net AssetsLast Five Fiscal Years

(accrual basis of accounting)(amounts expressed in thousands)

-90-

Table 3

2003 2004 2005 2006 2007

General fund Reserved 46$ 4$ 3$ -$ -$ Unreserved 4,951 5,460 5,380 5,353 5,086 Total general fund 4,997$ 5,464$ 5,383$ 5,353$ 5,086$

All other governmental funds Reserved 316$ 42$ 42$ 36$ 65$ Unreserved, reported in: Special revenue funds 1,793 1,951 1,663 2,168 2,479 Capital projects funds 2,632 2,156 1,347 1,463 1,446 Debt service fund 338 115 53 207 387 Total all other governmental funds 5,079$ 4,264$ 3,105$ 3,874$ 4,377$


(amounts expressed in thousands)

Fiscal Year

City of Bay City, MichiganFund Balances of Governmental Funds

Last Five Fiscal Years(modified accrual basis of accounting)

-91-

Table 4

2003 2004 2005 2006 2007Revenues

Property taxes and other taxes 13,263$ 12,469$ 12,528$ 12,557$ 12,816$ Licenses and permits 452 402 513 663 532 Federal grants 2,869 2,092 3,630 2,804 3,737 State shared revenues and grants 8,761 10,246 9,441 9,595 9,820 Local contributions - 88 66 54 16 Interest, rents and royalities 280 243 332 367 613 Charges for services 5,295 5,389 5,466 5,969 5,856 Fines and forfeits 161 171 153 136 132 Reimbursements, refunds and other revenue 1,206 779 543 961 875 Cable franchise fees 342 - - - - Total revenues 32,629 31,879 32,672 33,106 34,397

ExpendituresGeneral government 6,988 4,959 5,470 5,381 5,609 Public safety 12,505 12,530 13,205 13,826 14,358 Public works 6,275 6,894 7,158 7,203 6,777 Community and economic development 2,177 2,030 2,405 1,853 1,784 Recreation and culture 1,031 954 1,030 1,076 1,005 Capital outlay 2,921 2,354 2,550 1,393 2,841 Debt service: Principal 633 2,110 1,690 1,570 1,638 Interest and other fees 1,562 158 115 4 1 Total expenditures 34,092 31,989 33,623 32,306 34,013

Excess of revenues over (under) expenditures (1,463) (110) (951) 800 384

Other financing sources (uses)Transfers in 2,201 2,397 1,717 2,537 841 Lease proceeds - 31 - 29 - Transfers (out) (2,282) (2,516) (1,741) (2,627) (990) Total other financing sources (uses) (81) (119) (24) (61) (149)

Net change in fund balances (1,544)$ (229)$ (975)$ 739$ 235$

Debt service as a percentage of noncapital expenditures 7.04% 7.65% 5.81% 5.09% 5.26%


(amounts expressed in thousands)

Fiscal Year

City of Bay City, MichiganChanges in Fund Balances of Governmental Funds

Last Five Fiscal Years(modified accrual basis of accounting)

-92-

Table 5

Fiscal Property Electric Year Tax Operating1998 11,686,103$ 20,773,400$ 1999 12,317,637 21,284,574 2000 12,857,516 22,342,872 2001 11,869,699 20,450,764 2002 12,912,724 23,069,774 2003 13,262,771 21,567,902 2004 13,142,381 21,987,493 2005 12,933,879 23,069,375 2006 13,591,533 23,776,213 2007 13,640,017 26,103,470

City of Bay City, MichiganRevenue By Source

Last Ten Fiscal Years(accrual basis of accounting)

-93-

Table 6

Fiscal Estimated AssessedYear Total Total Actual Value as a

Ended Personal Assessed Direct Assessed Percentage ofJune 30 Residential Commercial Industrial Property Value Tax Rate Value Actual Value

1998 315,580$ 85,400$ 19,669$ 68,926$ 489,575$ 23.8600 979,150$ 50.00%1999 343,915 91,069 20,429 67,103 522,516 23.8700 1,045,032 50.00%2000 372,094 101,876 20,928 70,971 565,869 21.7500 1,131,738 50.00%2001 400,531 100,655 21,293 73,826 596,305 21.4000 1,192,610 50.00%2002 421,482 102,110 25,743 74,071 623,406 21.4000 1,246,812 50.00%2003 455,057 108,418 24,135 75,358 662,968 21.2027 1,325,936 50.00%2004 479,991 112,152 25,425 76,682 694,250 20.5505 1,388,500 50.00%2005 513,892 116,272 24,698 85,178 740,040 20.0505 1,480,080 50.00%2006 518,800 119,382 25,162 87,028 750,372 19.4532 1,500,744 50.00%2007 518,972 119,418 25,266 86,584 750,240 19.5503 1,500,480 50.00%

Source: Bay City Assessor's Office

Note: Property in the city is reassessed annually. The city assesses property at approzimately 50 percent of actual value for all types of real and personal property. Estimated actual value is calculated by dividing assessed value by those percentages.Tax rates are per $1,000 of taxable value.

Real Property

City of Bay City, MichiganAssessed Value and Estimated Actual Value of Taxable Property

Last Ten Fiscal Years(in thousands of dollars)

-94-

Table 7

TotalTotal Direct &

Fiscal Operating Special Debt City School Community OverlappingYear (1) (2) Millage Millage (3) Millage Millage District College County Rates

1998 18.1000 2.8600 3.0000 23.9600 30.4656 2.0427 9.6597 66.12801999 18.0000 2.8600 3.0000 23.8600 30.4656 2.0427 9.9499 66.31822000 17.4500 2.7700 3.6500 23.8700 30.4596 2.0427 9.9476 66.31992001 17.9500 0.0000 3.8000 21.7500 30.3594 2.0427 10.9478 65.09992002 17.8800 0.0000 3.5200 21.4000 30.1594 2.0427 10.9480 64.55012003 17.0130 1.2870 3.1000 21.4000 30.1594 2.5427 10.9486 65.05072004 17.8027 0.0000 3.4000 21.2027 29.0568 2.5427 10.9486 63.75082005 17.6905 0.0000 2.8600 20.5505 30.0458 2.5427 11.0326 64.17162006 17.3721 0.0000 2.6784 20.0505 30.0065 2.5427 11.0338 63.63352007 16.9615 (0.0971) 2.5888 19.4532 30.9480 2.0427 9.7100 62.1539

Source: Bay City Assessor's Office

(1) Rates reduced to comply with the Headlee Amendment.(2) This is the year in which the tax is levied. 1998 refers to the 1999 tax collection, 1999 refers to the 2000 tax collection, and so on.(3) Through 1999, the City levied a millage for Sanitation, which was also affected by the Headlee Amendment and reduced to comply with it. In 2002 (FY 2003), the special levy was for the settlement of the Heather Ridge lawsuit. In 2006 (FY 2007), a credit was issued due to an over-levy of County millage in Winter 2005.

Bay City Overlapping Rates

City of Bay City, MichiganProperty Tax Rates

Direct and Overlapping GovernmentsLast Ten Fiscal Years

-95-

Table 8

2007 1998Taxable Percentage of Taxable Percentage of

Assessed Total Taxable Assessed Total Taxable Taxpayer Value Rank Assessed Value Value Rank Assessed Value

General Motors/CPC 76,213,850$ 1 10.83% -$ -S C Johnson 13,694,576 2 1.95% - -Consumers Energy 4,833,680 3 0.69% 7,067,262 3 1.29%Kerkau Manufacturing 4,028,416 4 0.57% 1,942,500 7 0.35%Wenonah Park Properties 3,963,850 5 0.56% - -Carbone/Ultra Carbon Corp. 3,707,950 6 0.53% 2,657,690 4 0.49%Marina Place LLC 3,317,575 7 0.47% - -Chemical Bank 2,807,388 8 0.40% - -Northern Concrete Pipe 2,692,100 9 0.38% - -Charter Communications 2,508,050 10 0.36% - -Chevrolet-Pontiac-Canada - - 110,487,950 1 20.17%Thompson Bay Company, Inc. - - 10,310,700 2 1.88%F.P. Horak - - 2,318,150 5 0.42%First of America Bank - - 2,139,941 6 0.39%City of BC and Housing Comm - - 1,937,959 8 0.35%Brennan Marine - - 1,883,220 9 0.34%Art Van Furniture - - 1,865,062 10 0.34% Totals 117,767,435$ 16.74% 142,610,434$ 26.02%

2007 2000 (1)

Percentage of Percentage ofElectric Customer Revenues Rank Total Revenue Revenues Rank Total Revenue

City of Bay City 1,180,532$ 1 4.7% 950,691$ 1 4.1%Bay Medical Center 800,284 2 3.2% 734,889 2 3.1%Carbone USA 605,258 3 2.4% 403,597 4 1.7%S.C. Johnson & Sons 399,498 4 1.6% - -Bay County 357,867 5 1.4% 292,640 5 1.2%Bay Cast 296,713 6 1.2% 283,994 6 1.2%Bay City Board of Education 283,945 7 1.1% 432,840 3 1.8%Bay City Housing Commission 232,057 8 0.9% 144,734 9 0.6%Doubletree Hotel 228,176 9 0.9% - -Kerkau Manufacturing 223,754 10 0.9% 160,551 8 0.7%Thompson Bay Company - - 215,958 7 0.9%F P Horak Company - - 139,256 10 0.6%

Totals 4,608,084$ 18.30% 2,073,570$ 16.03%

(1) 2000 is the most historical year for which information is available.

City of Bay City, MichiganPrincipal Property Taxpayers and Electric Customers

June 30, 2007 and Nine Years Previous

-96-

Table 9

Fiscal Year Total Tax Collections Ended Levy for Percentage in Subsequent Percentage

June 30, Fiscal Year Amount of Levy Years Amount of Levy

1998 11,357$ 10,560$ 92.98% 787$ 11,347$ 99.91%1999 11,986 11,187 93.33% 771 11,958 99.77%2000 12,347 11,511 93.23% 799 12,310 99.70%2001 11,515 10,715 93.06% 710 11,425 99.22%2002 11,789 11,014 93.43% 688 11,702 99.26%2003 12,448 11,652 93.61% 680 12,332 99.07%2004 12,580 11,800 93.80% 672 12,472 99.14%2005 12,619 11,812 93.60% 703 12,515 99.18%2006 12,650 11,941 94.39% 707 12,648 99.98%2007 12,762 11,970 93.79% 765 12,735 99.79%

Fiscal Year of the LevyCollected within the

Total Collections to Date

City of Bay City, MichiganProperty Tax Levies and Collections

Last Ten Fiscal Years(amounts expressed in thousands)

-97-

Table 10

General Installment General Total PercentageFiscal Obligation Purchase Capital Revenue Obligation Term Primary of Personal Per Year Bonds Contracts Leases Bonds Bonds Loan Government Income (1) Capita (1)

1998 26,444,680$ 505,020$ -$ 14,799,646$ -$ 9,845,000$ 51,594,346$ 19.72% 1,412$ 1999 25,734,601 335,000 - 14,158,665 - 8,000,000 48,228,266 17.74% 1,359 2000 25,012,309 1,065,824 - 13,482,684 1,500,000 6,120,000 47,180,817 16.51% 1,367 2001 24,226,531 866,756 - 12,761,703 1,455,000 8,456,809 47,766,799 16.70% 1,297 2002 23,346,115 667,688 45,903 11,995,722 1,405,000 27,284,690 64,745,118 22.79% 1,759 2003 22,713,211 437,819 69,312 11,184,741 1,355,000 38,438,296 74,198,379 25.35% 2,015 2004 22,031,664 400,842 73,412 10,318,760 1,305,000 40,198,689 74,328,367 24.62% 2,019 2005 21,644,380 362,726 35,122 9,392,779 7,250,000 39,070,000 77,755,007 25.29% 2,112 2006 17,774,130 323,144 45,364 8,315,000 15,895,000 41,975,727 84,328,365 26.61% 2,290 2007 17,462,577 282,040 22,717 7,115,000 14,690,000 41,290,000 80,862,334 25.52% 2,196

Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements.

(1) See Statistical Table Number 15 for personal income and population data.

Governmental Activities

City of Bay City, MichiganRatios of Outstanding Debt by Type

Last Ten Fiscal Years

Business-type Activities

-98-

Table 11

Percentage ofEstimated

General Less: Amounts Less: Self Actual TaxableFiscal Obligation Available in Debt Supporting and Value of Per Year Bonds Service Fund Revenue Bonds Total Property Capita (1)

1998 52,070$ 476$ 27,275$ 24,319$ 4.97% 633.49 1999 47,773 114 23,389 24,270 4.64% 683.95 2000 46,710 136 22,073 24,501 4.33% 710.01 2001 43,707 240 23,359 20,108 3.38% 546.17 2002 39,926 298 16,955 22,673 3.64% 615.83 2003 35,253 338 12,540 22,375 3.17% 607.74 2004 33,655 115 11,624 21,917 2.98% 595.29 2005 38,287 53 16,643 21,591 2.78% 586.45 2006 41,984 207 24,210 17,567 2.24% 477.15 2007 32,153 387 14,690 17,076 2.28% 463.80

Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements.Taxable value provided by the Bay City Assessor's Office.

(1) See Statistical Table Number 15 for population data.

City of Bay City, MichiganRatios of General Bonded Debt Outstanding


-99-

Table 12

EstimatedEstimated Share of

Debt Percentage OverlappingGovernmental Unit Outstanding Applicable Debt

Overlapping Debt:

Bay County 26,704,897$ 21.62% 5,773,599$ Bay City School District 73,005,000 36.19% 26,420,510 Bangor Township Schools 13,195,000 0.38% 50,141 Bay-Arenac Intermediate School District 315,000 18.54% 58,401

TOTAL OVERLAPPING DEBT 32,302,650

Direct Debt:

City of Bay City 17,462,577 100.00% 17,462,577

TOTAL DIRECT AND OVERLAPPING DEBT 49,765,227

Sources: Debt outstanding and estimated share of overlapping debt provided by Municipal Advisory Council of Michigan.

Note: Overlapping governments are those that coincide, at least in part, with the geographic boundries of the city. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residenand businesses of Bay City. This process recognizes that, when considering the government's ability to issue and repaylong term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, thisdoes not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government.

City of Bay City, MichiganDirect and Overlapping Governmental Activities Debt

As of June 30, 2007

-100-

Table 13

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Debt limit 48,930$ 52,252$ 56,554$ 59,532$ 62,557$ 70,582$ 73,468$ 77,667$ 78,322$ 75,024$

Total net debt applicable to limit 6,894 6,681 6,083 5,365 4,646 23,731 23,221 28,841 33,462 31,766

Legal debt margin 42,036$ 45,571$ 50,471$ 54,167$ 57,911$ 46,851$ 50,247$ 48,826$ 44,860$ 43,258$

Total net debt applicable to the limit as a percentage of debt limit 14.09% 12.79% 10.76% 9.01% 7.43% 33.62% 31.61% 37.13% 42.72% 42.34%

Legal Debt Margin Calculation for Fiscal Year 2007

Assessed valutation, December 31, 2006 750,240$

Debt limit (10% of assessed valuation) 75,024$

Debt applicable to limit: (1) 32,153$ Less: Assets in Debt Service funds available for pymnt of principal 387 Total amount of debt applicable to debt limit 31,766

Legal debt margin 43,258$

City of Bay City, MichiganLegal Debt Margin Information


-101-

Table 14

NetFiscal Operating Operating Available Year Revenue (1) Expenses (2) Revenue Principal Interest Total Coverage

1998 6,625,026$ 4,234,759$ 2,390,267$ 1,410,000$ 371,325$ 1,781,325$ 1.34 1999 7,289,701 4,499,601 2,790,100 1,465,000 313,176 1,778,176 1.57 2000 7,257,582 5,018,802 2,238,780 1,525,000 248,479 1,773,479 1.26 2001 6,758,021 4,954,464 1,803,557 1,590,000 177,730 1,767,730 1.02 2002 7,374,747 5,426,593 1,948,154 1,665,000 103,251 1,768,251 1.10 2003 6,879,833 6,145,570 734,263 1,740,000 21,880 1,761,880 0.42 2004 7,157,161 5,638,468 1,518,693 - - - - 2005 7,530,484 5,698,760 1,831,724 - - - - 2006 7,371,955 6,127,635 1,244,320 - - - - 2007 7,551,683 6,661,017 890,666 - - - -

1998 21,861,463$ 15,473,524$ 6,387,939$ 605,000$ 844,273$ 1,449,273$ 4.41 1999 22,147,560 15,686,610 6,460,950 800,000 809,148 1,609,148 4.02 2000 23,418,490 16,734,311 6,684,179 835,000 768,273 1,603,273 4.17 2001 21,834,972 18,430,772 3,404,200 880,000 725,398 1,605,398 2.12 2002 23,866,773 18,890,250 4,976,523 925,000 680,273 1,605,273 3.10 2003 22,072,493 19,726,368 2,346,125 970,000 632,898 1,602,898 1.46 2004 22,302,847 19,262,347 3,040,500 1,025,000 580,460 1,605,460 1.89 2005 23,615,498 21,352,687 2,262,811 1,085,000 525,148 1,610,148 1.41 2006 24,363,634 23,453,586 910,048 1,145,000 469,111 1,614,111 0.56 2007 26,985,022 24,582,860 2,402,162 1,200,000 409,300 1,609,300 1.49

Note: Details regarding Bay City's outstanding debt can be found in the notes to the financial statements.

(1) Includes interest earnings.(2) Net of depreciation expense.

Debt Service (4) (5)

Electric System Revenue Bonds

City of Bay City, MichiganPledged-Revenue Coverage


Water System Revenue Bonds

-102-

Table 15

Personal PerIncome (2) Capita

Fiscal (amounts expressed Personal School UnemploymentYear Population (1) in thousands) Income Enrollment (3) Rate (4)

1998 36,548 $2,530,115 $20,285 10,287 3.70%1999 35,485 2,616,290 24,363 10,232 5.20%2000 34,508 2,718,432 24,458 10,199 3.40%2001 36,817 2,857,805 24,500 9,904 4.90%2002 36,817 2,859,582 26,064 9,843 7.10%2003 36,817 2,841,552 26,771 9,839 8.00%2004 36,817 2,927,325 26,067 9,790 8.20%2005 36,817 3,018,537 26,726 9,507 6.80%2006 36,817 3,075,000 27,651 9,355 6.50%2007 36,817 3,169,000 29,234 9,203 7.00%

Data Sources:(1) Population Division, U.S. Census Bureau (2) Bureau of Economic Analysis, U.S. Department of Commerce(3) Local school districts(4) U.S. Departmen of Labor Bureau of Labor Statistics Data - Unemployment rate information is a yearly average not seasonally adjusted.

City of Bay City, MichiganDemographic and Economic Statistics


-103-

Table 16

2007 1998Percentage of Percentage ofTotal County Total County

Employer Employees Rank Employment Employees Rank Employment

Bay Regional Medical Center (3) 1,870 1 3.71% 2,447 1 4.66%Bay City Public Schools (1) 1,106 2 2.19% 1,278 4 2.43%General Motors Powertrain 675 3 1.34% 1,409 3 2.68%Bay County 584 4 1.16% 578 7 1.10%SC Johnson 450 5 0.89% - -City of Bay City 371 6 0.74% 429 10 0.82%F.P. Horak 199 7 0.39% - -Labadie Auto Group 165 8 0.33% - -Northern Concrete 126 9 0.25% - -Doubletree Hotel and Conference Center 120 10 0.24% - -Dow Corning Corporation - - 1,622 2 3.09%Delta College - - 571 8 1.09%Meijer Inc. - - 711 6 1.35%Consumers Energy - - 532 9 1.01%Monitor Sugar Company (2) - - 800 5 1.52% Totals 5,666 11.24% 10,377 19.76%

Information presented for Bay County as this information is not available for the City of Bay City.

Source:Bay City Times and U.S. Department of Labor Bureau of Labor Statistics

(1) Excludes substitute teachers.(2) Figure represents peak manufacturing/industry seasons.(3) Previously Bay Health Systems

City of Bay City, MichiganPrincipal Employers

2007 and 1998

-104-

Table 17

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

FunctionGeneral government 61 58 63 64 68 69 67 65 62 60 Public safety Police 103 103 103 100 100 96 88 71 66 66 Fire 60 60 60 60 60 61 61 58 58 57 Public works 73 73 69 71 67 68 67 65 64 61 Recreation and culture 11 11 14 12 17 17 17 17 17 15 Community and economic development 5 7 7 6 6 8 7 12 11 10 Electric 43 51 45 46 48 48 48 47 47 45 Water 45 44 45 44 44 43 44 44 43 42.5 Sewer 42 42 42 43 42 42 42 40 46 42.5 Total 443 449 448 446 452 452 441 419 414 399

Source: City of Bay City Finance Department

Full-time Equivalent Employees as of June 30, 2007

City of Bay City, MichiganFull-time Equivalent City of Bay City Employees by Function


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Table 18

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Function

General Government Elections Number of registered voters 27,273 28,107 29,020 26,031 25,733 23,779 23,988 24,772 24,311 24,509 Public safety Police Department Number of citations issued 8,890 7,887 8,174 10,480 11,925 9,910 7,989 6,183 5,796 8,343 Number of complaints filed 9,352 16,345 6,606 7,281 7,638 7,869 7,166 6,845 5,946 6,113 Number of calls for service 50,061 - 29,288 29,600 35,102 37,194 34,395 32,445 29,470 28,957 Number of DUI offenses 204 181 228 334 276 376 288 278 185 337 Fire Department Number of emergency runs - - - - 3,861 3,995 3,989 4,663 3,677 1,341 Number of fire prevention programs 7 7 7 7 7 Public works Streets Tons of salt used - - - - 2,190 2,884 2,607 2,784 3,060 2,280 Recreation and culture Park acreage maintained - - - - - - - - - 238 Special events - - - - - - - - - 58 Shelter rentals - - - - - - - - - 63 Street trees planted 922 731 558 792 370 364 392 391 482 716 Street trees trimmed - - - - - - - - - 2,998 Street trees removal - - - - - - - - - 251 Community and Economic Development Housing rehabiltion units 29 20 9 9 6 14 10 13 5 6 Emergency rehabilitation units 29 29 15 23 20 29 27 47 33 23 Electric Department Generating capacity 33,290 33,290 33,290 33,295 33,295 33,290 33,295 33,295 33,295 33,295 Sewer System Sanitary and storm sewer (miles) 276 276 276.19 276.19 276.19 277.08 277 277 277 310 Daily average treatment (million gallons) 8 8 8 8 8 8 8.6 9 9 9 Maximum daily capacity (million gallons) 18 18 18 18 18 18 18 18 18 18 Water system Miles of water mains 230 230 230 230 230 232 232 232 231.86 232 Daily average consumption (million gallons) 9.90 9.90 10.33 9.76 9.76 10.52 9.76 9.31 9.7 8.90 Maximum daily treatment (million gallons) 40 40 40 40 40 40 40 40 40 40 Airport Private hanger land leases - - - - - - - - 20 22 Public hanger lease - - - - - - - - 1 1 Take offs & landings - - - - - - - - 11,490 n/a Cell tower leases - - - - - - - - 1 1 Aviation fuel sold (gallons) - - - - - - - - - 29,000 Cemetery Interments - - - - - - - - 58 35 Grave sales - - - - - - - - 25 30 Foundations set - - - - - - - - 21 21 Marina Seasonal Dock Leases - - - - - - - - 50 50 Transient Dock Rentals - - - - - - - - 1,540 1,585

City of Bay City, MichiganOperating Indicators by Function


Fiscal Year

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Table 19

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Function

Public safety Police Stations 1 1 1 1 1 1 1 1 1 1 Vehicles 37 38 39 42 39 42 40 34 31 25

Fire Stations 4 4 4 4 4 4 4 4 4 4 Vehicles - - 15 14 14 14 14 14 13 13

Public works Bascule span bridges 2 2 2 2 2 2 2 2 2 2 Streets (miles) 199 199 199 199 199 199 199 199 199 199

Recreation and culture Park areas 17 18 18 18 18 18 18 25 24 24

Sources: Various city departments.Note: No capital asset indicators are available for the general government and economic development functions.Not all historical information is available, this table will continue to be populated as more information becomes available.

Fiscal Year

City of Bay City, MichiganCapital Asset Statistics by Function


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SINGLE AUDITThe Single Audit is the Auditors' report on internal controls over compliance

with applicable laws and regulations. The City of Bay City is required to undergo an annual single audit conforming with the provisions of the

Single Audit Act Amendments of 1996 and U.S. Office of Management and Budget Circular A-133, Audits of State and Local Governments.

City of Bay City, MichiganSchedule of Expenditures of Federal Awards

For the Fiscal Year Ended June 30, 2007

Federal orFederal (Pass-Through) Amended

Federal/Pass-Through Grantor CFDA Grant Grant FederalProgram Title Number Number Amount Expenditures

U.S. Department of Housing and Urban DevelopmentCommunity Development Block

Grant Entitlements 14.218 B-98-MC-26-0003 1,838,000$ 2,970$ 14.218 B-99-MC-26-0003 1,849,000 67,475 14.218 B-00-MC-26-0003 1,855,000 - 14.218 B-01-MC-26-0003 1,926,000 1,970 14.218 B-02-MC-26-0003 1,878,000 143,015 14.218 B-03-MC-26-0003 1,758,000 201,615 14.218 B-04-MC-26-0003 1,742,000 16,546 14.218 B-05-MC-26-0003 1,649,000 253,379 14.218 B-06-MC-26-0003 1,479,185 968,610 14.218 n/a n/a 224,799

1,880,379

HOME Program 14.239 M98-MC260219 368,000 1,797 14.239 M99-MC260219 398,000 6,021 14.239 M00-MC260219 397,000 1,625 14.239 M01-MC260219 442,000 64,619 14.239 M02-MC260219 442,000 37,001 14.239 M03-MC260219 286,780 18,741 14.239 M04-MC260219 286,796 51,205 14.239 M05-MC260219 274,229 79,368 14.239 M06-MC260219 258,107 12,517

272,894

Total U.S. Department of Housing and Urban Development 2,153,273

U.S. Department of JusticeLocal Law Enforcement Block Grant - JAG 2003 16.592 2003-LX-BX-1003 24,825 18,816 Local Law Enforcement Block Grant - JAG 2004 16.592 2004-LX-BX-1047 12,474 12,474 Local Law Enforcement Block Grant - JAG 2006 16.592 2006-LX-BX 7,057 7,057 Local Law Enforcement Block Grant - Vests 16.592 Unknown 4,149 2,546

Total U.S. Department of Justice 40,893

U.S. Department of TransportationPassed through Michigan Department of Transportation

Historical restoration grant - train depot 20.205 STP0509(013) 706,872 217,350 RR4588

Passed through Michigan Department of State PoliceState and Community Highway Safety 20.600 PT-06-36 16,918 1,820 State and Community Highway Safety 20.600 PT-07 12,991 10,165

Total U.S. Department of Transportation 229,335

U.S. Environmental Protection AgencyPassed through Michigan Department of Environmental Quality

Drinking Water Revolving Funds 66.468 5194-01 10,382,035 530,129

Total Federal Financial Assistance - Primary Government 2,953,630$

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Reconciliation to Federal Revenue Recognized in Financial Statements

Federal awards per schedule 2,953,630$

Add: Federal awards administered by the Michigan Department of TransportationWenonah Street, Henry Street, Liberty Bridge 1,659,368 North Henry Phase I 218,939 James Clements Airport Hangar Construction 20,000

Add: Federal awards administered by the Michigan Department of State PoliceHomeland security equipment passed through to Bay City fire department 63,336 Decontamination kit passed through to Bay City fire department 3,058

Less: Federal portion of drawdowns from State Revolving Loan Fund for sewer improvements (530,129)

Less: Program income of the Community Development Block Grants and HOME Program (224,799)

Total Federal Revenue Recognized in Financial Statements 4,163,403$

Notes to Schedule of Expenditures of Federal Awards

Note 1: Basis of PresentationThe accompanying Schedule of Expenditures of Federal Awards includes the federal grant activity of the City of Bay City and is presentedon the modified accrual basis of accounting. The information presented in this schedule is presented in accordance with the requirementsof OMB Circular A-133, "Audits of States, Local Governments and Non-Profit Organizations."

Note 2: SubrecipientsOf the federal expenditures presented in the schedule, the City of Bay City provided federal awards to subrecipients as follows:

FederalFederal/Pass-Through Grantor CFDA Amount Provided

Program Title Number to SubrecipientsCommunity Development Block

Grant Entitlements 14.218 88,895$ HOME Program 14.239 268,740 Historical restoration grant - train depot 20.205 217,350

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INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE

AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

December 27, 2007 To the Honorable Mayor and City Commission City of Bay City, Michigan We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Bay City, Michigan, as of and for the year ended June 30, 2007, which collectively comprise the City’s basic financial statements as listed in the table of contents, and have issued our report thereon dated December 27, 2007. Our report was modified to include a reference to other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Other auditors audited the financial statements of Wenonah Park Properties, Inc., as described in our report on the City of Bay City, Michigan’s financial statements. This report does not include the results of the other auditors’ testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City of Bay City, Michigan’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Bay City, Michigan’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City of Bay City, Michigan’s internal control over financial reporting. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the City of Bay City, Michigan’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted

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accounting principles such that there is more than a remote likelihood that a misstatement of the City of Bay City, Michigan’s financial statements that is more than inconsequential will not be prevented or detected by the City of Bay City, Michigan’s internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the City of Bay City, Michigan’s internal control. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as identified above. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Bay City, Michigan’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other maters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the Audit Committee, management, Mayor and City Commissioners, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.



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INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND

INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133

December 27, 2007 To the Honorable Mayor and City Commission City of Bay City, Michigan Compliance We have audited the compliance of the City of Bay City, Michigan with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended June 30, 2007. The City of Bay City, Michigan’s major federal program is identified in the summary of auditors’ results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to its major federal program is the responsibility of the City of Bay City, Michigan’s management. Our responsibility is to express an opinion of City of Bay City, Michigan’s compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City of Bay City, Michigan’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the City of Bay City, Michigan’s compliance with those requirements.

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In our opinion, the City of Bay City, Michigan complied, in all material respects, with the requirements referred to above that are applicable to its major federal program for the year ended June 30, 2007. Internal Control Over Compliance The management of City of Bay City, Michigan is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered City of Bay City, Michigan’s internal control over compliance with the requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Entity’s internal control over compliance. A control deficiency in an entity’s internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect noncompliance with a type of compliance requirement of a federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity’s ability to administer a federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a federal program that is more than inconsequential will not be prevented or detected by the Entity’s internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected by the Entity’s internal control. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of the Audit Committee, management, the governing body, others within the entity, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. .

CITY OF BAY CITY, MICHIGAN

SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2007

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SECTION I - SUMMARY OF AUDITOR’S RESULTS Financial Statements Type of auditor’s report issued: Unqualified on financial statements Internal controls over financial reporting: Material weakness(es) identified? yes X no Reportable condition(s) identified not considered to be material weaknesses? yes X none reported Noncompliance material to financial statements noted? yes X no Federal Awards Internal Control over major programs: Material weakness(es) identified? yes X no Reportable condition(s) identified not considered to be material weaknesses? yes X none reported Type of auditor’s report issued on compliance for major programs: Unqualified Any audit findings disclosed that are required to be reported in accordance with Circular A-133, Section 510(a)? yes X no Identification of Major Programs: CFDA Number Name of Federal Program or Cluster 14.218 Community Development Block Grant

Entitlements Dollar threshold used to distinguish between Type A and Type B programs: $300,000 Auditee qualified as low-risk auditee? X yes no

CITY OF BAY CITY, MICHIGAN

SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2007

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SECTION II – FINANCIAL STATEMENT FINDINGS None SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS None SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS None

city of bay city, michigan · 2007. 12. 29. · city of bay city, michigan comprehensive annual...

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